Stock Analysis

Spirax-Sarco Engineering (LON:SPX) Has Announced That It Will Be Increasing Its Dividend To £0.425

  •  Updated
LSE:SPX
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Spirax-Sarco Engineering plc's (LON:SPX) dividend will be increasing from last year's payment of the same period to £0.425 on 11th of November. Even though the dividend went up, the yield is still quite low at only 1.3%.

See our latest analysis for Spirax-Sarco Engineering

Spirax-Sarco Engineering's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Spirax-Sarco Engineering was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 32.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

historic-dividend
LSE:SPX Historic Dividend October 2nd 2022

Spirax-Sarco Engineering Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of £0.528 in 2012 to the most recent total annual payment of £1.40. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Spirax-Sarco Engineering has been growing its earnings per share at 11% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Spirax-Sarco Engineering Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 13 Spirax-Sarco Engineering analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Spirax-Sarco Engineering is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About LSE:SPX

Spirax-Sarco Engineering

Spirax-Sarco Engineering plc provides engineered solutions for the users of industrial and commercial steam systems, electrical heating and temperature management systems, and pumps and fluid path technologies.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation0
Future Growth3
Past Performance4
Financial Health6
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet with proven track record and pays a dividend.