Senior (LON:SNR) Is Due To Pay A Dividend Of £0.0165

Senior plc's (LON:SNR) investors are due to receive a payment of £0.0165 per share on 30th of May. The dividend yield will be in the average range for the industry at 1.8%.

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Senior's Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Senior was paying only paying out a fraction of earnings, but the payment was a massive 132% 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.

Looking forward, earnings per share is forecast to rise by 156.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 13% by next year, which is in a pretty sustainable range.

Check out 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 £0.024. The dividend has shrunk at around 8.2% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Senior May Find It Hard To Grow The Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. In the last five years, Senior's earnings per share has shrunk at approximately 2.1% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

The Dividend Could Prove To Be Unreliable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 3 analysts we track are forecasting for the future. Is Senior not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.