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Spectrum Brands Holdings (NYSE:SPB) Has Re-Affirmed Its Dividend Of US$0.42

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The board of Spectrum Brands Holdings, Inc. (NYSE:SPB) has announced that it will pay a dividend of US$0.42 per share on the 14th of December. The dividend yield is 1.6% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Spectrum Brands Holdings

Spectrum Brands Holdings' Earnings Easily Cover the Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Spectrum Brands Holdings' dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 25%, which is in a comfortable range for us.

historic-dividend
historic-dividend

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 2017, the dividend has gone from US$10.42 to US$1.68. This works out to a decline of approximately 84% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Spectrum Brands Holdings' Dividend Might Lack Growth

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's encouraging to see Spectrum Brands Holdings has been growing its earnings per share at 29% a year over the past five years. EPS has been growing well, but Spectrum Brands Holdings has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Spectrum Brands Holdings has 5 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

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