This has not been an excellent 12 months for shareholders in Spirax (LSE: SPX). Sure, they have been rewarded with a rise within the annual dividend – as has been the case annually for an unbelievable 56 years. However the FTSE 100 share has slumped 34% for the reason that begin of the 12 months.

Would possibly that dramatic share price fall be a chance for me to purchase right into a confirmed FTSE success story with a stellar dividend report?

Dividends previous, current, and future

The primary level to notice is that, as with all share, previous dividends are usually not essentially a information to what is going to occur in future.

That mentioned, Spirax’s previous efficiency on this regard has been nothing in need of good. I count on the corporate’s board feels extremely motivated to take care of that report if it probably can.

On the interim level this 12 months, the dividend was raised 3% in comparison with the identical interval final 12 months. By the FTSE 100 agency’s requirements, that was modest stuff. Final 12 months, for instance, noticed a full-year improve of 5% whereas the earlier 12 months had seen 12% progress.

However whereas the latest improve was not as thrilling as some previous rises, what I discovered reassuring was the protection. Spirax’s interim dividend per share was coated 2.6 occasions by fundamental earnings per share. I regard that as robust protection.

Money move conundrum

Nevertheless, it was not totally coated by adjusted free money move.

In truth, money flows in the course of the first half have been -£57m. But the move of adjusted money from operations got here in at £86m. What explains the distinction?

Curiosity prices got here in at £21m, reflecting the agency’s web debt (as of the tip of June) of £718m. On a optimistic observe, that web debt was under the extent on the similar level the prior 12 months. But it surely displays the truth that Spirax’s acquisition spree over current years has concerned including extra borrowings to its stability sheet.

Seen positively, that provides the agency higher economies of scale, has helped it construct its buyer base, and also can enhance the vary of companies it is ready to provide to present prospects.

However from a much less optimistic viewpoint, the debt has elevated strain for the enterprise to carry out. With rates of interest greater and financial confidence decrease than was the case just a few years in the past, that could be a threat to profitability.

Heaps to love about Spirax shares

Nonetheless, I proceed to be optimistic in regards to the long-term outlook right here.

Spirax has recognized a worthwhile area of interest that advantages from substantial and resilient buyer demand. That has been a boon for its long-term income progress.

In flip, that has been mirrored within the decades-long monitor report of dividend progress.

Whereas a weak economic system continues to pose dangers for non-essential spending by a few of its industrial prospects, over time I’m assured Spirax will proceed to carry out effectively.

The share price fall this 12 months has introduced the FTSE agency’s price-to-earnings ratio down to 26. That also feels a bit wealthy to me regardless of the corporate’s strengths. So, for now, I’m watching with out shopping for.