Spectrum Brands Holdings (NYSE:SPB) Has Affirmed Its Dividend Of US$0.42
The board of Spectrum Brands Holdings, Inc. (NYSE:SPB) has announced that it will pay a dividend on the 15th of March, with investors receiving US$0.42 per share. This payment means that the dividend yield will be 1.9%, which is around the industry average.
View our latest analysis for Spectrum Brands Holdings
Spectrum Brands Holdings' Distributions May Be Difficult To Sustain
We aren't too impressed by dividend yields unless they can be sustained over time. Despite not being profitable, Spectrum Brands Holdings is paying out most of its free cash flow as a dividend. Generally it is unsustainable for a company to be paying a dividend while unprofitable, and with limited reinvestment into the business growth may be slow.
Over the next year, EPS could expand by 22.2% if recent trends continue. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.
Spectrum Brands Holdings' Dividend Has Lacked Consistency
Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2018, the dividend has gone from US$10.42 to US$1.68. The dividend has fallen 84% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Company Could Face Some Challenges Growing The Dividend
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. We are encouraged to see that Spectrum Brands Holdings has grown earnings per share at 22% per year over the past five years. The company hasn't been turning a profit, but it running in the right direction. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Spectrum Brands Holdings that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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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.
