Senior (LON:SNR) Has Announced A Dividend Of £0.0085

Senior plc (LON:SNR) will pay a dividend of £0.0085 on the 14th of November. Even though the dividend went up, the yield is still quite low at only 1.2%.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Senior's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Senior's dividend was only 33% of earnings, however it was paying out 138% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

The next year is set to see EPS grow by 48.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Senior

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from £0.0563 total annually to £0.025. This works out to be a decline of approximately 7.8% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

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. We are encouraged to see that Senior has grown earnings per share at 70% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Senior's Dividend

Overall, we always like to see the dividend being raised, but we don't think Senior will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Senior that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.