Sensient Technologies (NYSE:SXT) Has Affirmed Its Dividend Of $0.41
The board of Sensient Technologies Corporation (NYSE:SXT) has announced that it will pay a dividend of $0.41 per share on the 1st of March. The dividend yield will be 2.7% based on this payment which is still above the industry average.
View our latest analysis for Sensient Technologies
Sensient Technologies' Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 801% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
The next year is set to see EPS grow by 34.1%. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.
Sensient Technologies Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.92 in 2014, and the most recent fiscal year payment was $1.64. This means that it has been growing its distributions at 6.0% per annum 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 could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. However, Sensient Technologies' EPS was effectively flat over the past five years, which could stop the company from paying more every year.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Sensient Technologies has 2 warning signs (and 1 which is significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
