H.B. Fuller (NYSE:FUL | FUL Price Prediction) manufactures adhesives and sealants globally. The company pays $0.915 per share annually, yielding 1.52%. With a 33-year dividend increase streak and conservative payout ratios, I evaluated whether this dividend can survive recent earnings headwinds and elevated debt.
| Metric | Value |
|---|---|
| Annual Dividend | $0.915 per share |
| Dividend Yield | 1.52% |
| Consecutive Years of Increases | 33 years |
| Most Recent Increase | 5.6% (2025) |
| Dividend Aristocrat Status | Yes (25+ years) |
Payout Ratios Provide Substantial Cushion
The company paid $47.6 million in dividends during 2024 against $163.2 million in free cash flow, producing a free cash flow payout ratio of 29%. The five-year average FCF payout ratio sits at 24%, meaning the company typically returns less than one-quarter of its cash generation to shareholders.
The 2024 earnings payout ratio was 37% ($47.6 million dividends against $130.4 million net income). This remains comfortably below the 60% threshold I consider healthy for industrial companies. The trailing twelve-month earnings payout ratio of 43% ($0.915 divided by $2.11 EPS) reflects recent earnings pressure but still leaves meaningful room for the dividend.
| Metric | Value | Assessment |
|---|---|---|
| Earnings Payout Ratio (TTM) | 43% | Healthy |
| FCF Payout Ratio (2024) | 29% | Very Healthy |
| 5-Year Average FCF Payout | 24% | Excellent |
Debt Levels Warrant Attention
Total debt stands at $2.08 billion against shareholders’ equity of $1.96 billion, producing a debt-to-equity ratio of 1.06x. Net debt of approximately $1.96 billion translates to 3.6x EBITDA, which sits at the upper end of what I consider manageable for an industrial manufacturer.
With quarterly interest expense of $33.6 million ($134 million annualized) and EBIT of $316 million in 2024, the interest coverage ratio calculates to 2.4x. This provides adequate but not exceptional cushion. If earnings decline further or interest rates remain elevated, debt service could pressure cash available for dividends.
Three Decades of Increases, But Growth Is Slowing
The company has raised its dividend for 33 consecutive years, qualifying it as a Dividend Aristocrat. The quarterly payment increased from $0.2225 in Q1 2025 to $0.235 in subsequent quarters, reflecting the 5.6% annual increase. Over the past five years, the dividend has grown at a 7.7% compound annual rate.
However, growth has decelerated from the 13% increase in 2022. Given the earnings pressure (net income fell 10% in 2024 and 20% in 2023), management appears appropriately cautious about maintaining aggressive dividend growth while preserving balance sheet flexibility.
This Dividend Looks Safe Despite Headwinds
Dividend Safety Rating: Safe
The combination of a 29% FCF payout ratio, 43% earnings payout ratio, and 33-year increase streak gives me confidence this dividend will survive the current earnings cycle. Even in 2022, when free cash flow fell to $126.5 million, the company covered its dividend by more than 3x. Management also accelerated share buybacks to $39.6 million in 2024, demonstrating confidence in cash generation.
I would be comfortable owning H.B. Fuller for income if you can accept modest dividend growth in the near term while earnings stabilize. The company’s guidance for 4% to 5% EBITDA growth in fiscal 2025 suggests stabilization is underway. However, I would be cautious if net debt-to-EBITDA rises above 4x or if interest coverage falls below 2x, as this would reduce the dividend safety cushion.
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