Yahoo Finance Senior (LON:SNR) Is Paying Out A Larger Dividend Than Last Year
The board of Senior plc (LON:SNR) has announced that the dividend on 31st of May will be increased to £0.017, which will be 70% higher than last year's payment of £0.01 which covered the same period. Although the dividend is now higher, the yield is only 1.4%, which is below the industry average.
View our latest analysis for Senior
Senior's Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Senior was paying only paying out a fraction of earnings, but the payment was a massive 148% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
Looking forward, earnings per share is forecast to rise by 95.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.0479 in 2014, and the most recent fiscal year payment was £0.023. The dividend has shrunk at around 7.1% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Come By
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. In the last five years, Senior's earnings per share has shrunk at approximately 9.9% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
The Dividend Could Prove To Be Unreliable
In summary, while it's always good to see the dividend being raised, we don't think Senior's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Senior is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 3 analysts we track are forecasting for the future. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
