This has not been a good year for shareholders in Spirax (LSE: SPX). Yes, they were rewarded with an increase in the annual dividend – as has been the case each year for an incredible 56 years. But the FTSE 100 share has slumped 34% since the start of the year.

Might that dramatic share price fall be an opportunity for me to buy into a proven FTSE success story with a stellar dividend record?

Dividends past, present, and future

The first point to note is that, as with any share, past dividends are not necessarily a guide to what will happen in future.

That said, Spirax’s past performance in this regard has been nothing short of brilliant. I expect the company’s board feels highly motivated to maintain that record if it possibly can.

At the interim point this year, the dividend was raised 3% compared to the same period last year. By the FTSE 100 firm’s standards, that was modest stuff. Last year, for example, saw a full-year increase of 5% while the previous year had seen 12% growth.

But while the most recent increase was not as exciting as some past rises, what I found reassuring was the coverage. Spirax’s interim dividend per share was covered 2.6 times by basic earnings per share. I regard that as strong coverage.

Cash flow conundrum

However, it was not fully covered by adjusted free cash flow.

In fact, cash flows during the first half were -£57m. Yet the flow of adjusted cash from operations came in at £86m. What explains the difference?

Interest costs came in at £21m, reflecting the firm’s net debt (as of the end of June) of £718m. On a positive note, that net debt was below the level at the same point the prior year. But it reflects the fact that Spirax’s acquisition spree over recent years has involved adding more borrowings to its balance sheet.

Seen positively, that gives the firm greater economies of scale, has helped it build its customer base, and can also improve the range of services it is able to offer to existing customers.

But from a less positive viewpoint, the debt has increased pressure for the business to perform. With interest rates higher and economic confidence lower than was the case a few years ago, that is a risk to profitability.

Lots to like about Spirax shares

Still, I continue to be positive about the long-term outlook here.

Spirax has identified a profitable niche that benefits from substantial and resilient customer demand. That has been a boon for its long-term revenue growth.

In turn, that has been reflected in the decades-long track record of dividend growth.

While a weak economy continues to pose risks for non-essential spending by some of its industrial customers, over time I am confident Spirax will continue to perform well.

The share price fall this year has brought the FTSE firm’s price-to-earnings ratio down to 26. That still feels a bit rich to me despite the company’s strengths. So, for now, I am watching without buying.