Yahoo Finance Spectris' (LON:SXS) Shareholders Will Receive A Bigger Dividend Than Last Year
Spectris plc (LON:SXS) will increase its dividend from last year's comparable payment on the 28th of June to £0.539. This makes the dividend yield 2.4%, which is above the industry average.
View our latest analysis for Spectris
Spectris' Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Spectris' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
The next year is set to see EPS grow by 45.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.
Spectris Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was £0.403 in 2014, and the most recent fiscal year payment was £0.792. This works out to be a compound annual growth rate (CAGR) of approximately 7.0% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Spectris hasn't seen much change in its earnings per share over the last five years.
Our Thoughts On Spectris' Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 12 analysts we track are forecasting for the future. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
