Severn Trent PLC's Dividend Analysis
Understanding Severn Trent PLC's Upcoming Dividend Payout
Severn Trent PLC (STRNY) recently announced a dividend of $0.59 per share, payable on 2024-01-22, with the ex-dividend date set for 2023-12-06. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Severn Trent PLCs dividend performance and assess its sustainability.
What Does Severn Trent PLC Do?
Warning! GuruFocus has detected 11 Warning Signs with STRNY.
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Severn Trent PLC is a United Kingdom-based water utilities company. The company mainly operates in the U.K., but also in the United States and other countries in Europe. The company derives the majority of its revenue from its regulated water and wastewater segment, which supplies water and conducts sewage and environmental services. The company also operates a business services segment that is involved with renewable energy operations. The company provides contract services to industrial and municipal clients to develop water treatment facilities and networks. The firm generates its renewable energy by using hydropower, wind power, and solar power.
A Glimpse at Severn Trent PLC's Dividend History
Severn Trent PLC has maintained a consistent dividend payment record since 2011. Dividends are currently distributed on a bi-annual basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Severn Trent PLC's Dividend Yield and Growth
As of today, Severn Trent PLC currently has a 12-month trailing dividend yield of 4.10% and a 12-month forward dividend yield of 4.33%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, Severn Trent PLC's annual dividend growth rate was 2.70%. Extended to a five-year horizon, this rate increased to 4.50% per year. And over the past decade, Severn Trent PLC's annual dividends per share growth rate stands at 3.60%.
Based on Severn Trent PLC's dividend yield and five-year growth rate, the 5-year yield on cost of Severn Trent PLC stock as of today is approximately 5.11%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Severn Trent PLC's dividend payout ratio is 2.67, which may suggest that the company's dividend may not be sustainable.
Severn Trent PLC's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Severn Trent PLC's profitability 7 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported net profit in 9 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Severn Trent PLC's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and Severn Trent PLC's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Severn Trent PLC's revenue has increased by approximately 3.70% per year on average, a rate that underperforms approximately 70.02% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Severn Trent PLC's earnings increased by approximately -26.30% per year on average, a rate that underperforms approximately 87.47% of global competitors. Lastly, the company's 5-year EBITDA growth rate of -13.90%, which underperforms approximately 88.17% of global competitors.
Investing in Severn Trent PLC's Dividends: A Wise Choice?
In conclusion, while Severn Trent PLC has a history of consistent dividend payments and a reasonable yield, potential investors should be cautious due to the company's high payout ratio and underperforming growth metrics. The profitability rank does provide some assurance of the company's financial health, but the negative growth rates in revenue and earnings may raise questions about the long-term sustainability of the dividend. Investors considering Severn Trent PLC should weigh these factors and monitor the company's future performance to ensure their investment aligns with their financial goals. For those interested in exploring further, GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
