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

Senior plc (LON:SNR) has announced that it will pay a dividend of £0.0085 per share on the 14th of November. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.

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Senior's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Senior was paying only paying out a fraction of earnings, but the payment was a massive 138% of 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.

Over the next year, EPS is forecast to expand by 43.5%. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Senior

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of £0.0563 in 2015 to the most recent total annual payment of £0.025. The dividend has shrunk at around 7.8% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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. Senior has seen EPS rising for the last five years, at 70% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Senior's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Senior that investors need to be conscious of moving forward. Is Senior not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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