Smith & Nephew PLC: An In-depth Analysis of its Dividend Performance
Exploring the Sustainability and Prospects of Smith & Nephew PLC's Dividends
Smith & Nephew PLC(NYSE:SNN) recently announced a dividend of $0.29 per share, payable on 2023-11-01, with the ex-dividend date set for 2023-10-05. 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 deep dive into Smith & Nephew PLCs dividend performance and assess its sustainability.
About Smith & Nephew PLC
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Smith & Nephew designs, manufactures, and markets orthopedic devices, sports medicine and arthroscopic technologies, and wound-care solutions. Roughly 41% of the U.K.-based firm's revenue comes from orthopedic products, and another 30% is sports medicine and ENT. The remaining 29% of revenue is from the advanced wound therapy segment. Roughly half of Smith & Nephew's total revenue comes from the United States, just over 30% is from other developed markets, and emerging markets account for the remainder.
Smith & Nephew PLC's Dividend History
Smith & Nephew PLC has maintained a consistent dividend payment record since 2000. Dividends are currently distributed on a bi-annually basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Smith & Nephew PLC's Dividend Yield and Growth
As of today, Smith & Nephew PLC currently has a 12-month trailing dividend yield of 3.18% and a 12-month forward dividend yield of 3.18%. This suggests an expectation of same dividend payments over the next 12 months.
Smith & Nephew PLC's dividend yield of 3.18% is near a 10-year high and outperforms than 75.91 of global competitors in the Medical Devices & Instruments industry, suggesting that the company's dividend yield stands out as an attractive proposition for income investors.
Over the past three years, Smith & Nephew PLC's annual dividend growth rate was 4.60%. Extended to a five-year horizon, this rate decreased to 4.50% per year. And over the past decade, Smith & Nephew PLC's annual dividends per share growth rate stands at 8.20%.
Based on Smith & Nephew PLC's dividend yield and five-year growth rate, the 5-year yield on cost of Smith & Nephew PLC stock as of today is approximately 3.96%.
Is Smith & Nephew PLC's Dividend Sustainable?
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 2023-06-30, Smith & Nephew PLC's dividend payout ratio is 1.50. This may suggest that the company's dividend may not be sustainable.
Smith & Nephew PLC's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Smith & Nephew PLC's profitability 8 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Smith & Nephew PLC's Growth Metrics
To ensure the sustainability of dividends, a company must have robust growth metrics. Smith & Nephew PLC's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Smith & Nephew PLC's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Smith & Nephew PLC's revenue has increased by approximately 3.10% per year on average, a rate that underperforms than approximately 61.68% 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, Smith & Nephew PLC's earnings increased by approximately -26.30% per year on average, a rate that underperforms than approximately 87.23% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -17.80%, underperforms than approximately 91.51% of global competitors.
Conclusion
In conclusion, while Smith & Nephew PLC's dividend yield is attractive, the sustainability of its dividends is questionable due to a high payout ratio. Although the company has a good profitability rank and a consistent dividend payment record, its growth metrics indicate underperformance compared to global competitors. Therefore, investors should exercise caution and conduct further research before making investment decisions based on dividends alone.
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This article first appeared on GuruFocus.
