Stock Analysis

Spirax-Sarco Engineering's (LON:SPX) Dividend Will Be Increased To £0.425

  •  Updated
LSE:SPX
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The board of Spirax-Sarco Engineering plc (LON:SPX) has announced that the dividend on 11th of November will be increased to £0.425, which will be 10% higher than last year's payment of £0.385 which covered the same period. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Spirax-Sarco Engineering

Spirax-Sarco Engineering's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Spirax-Sarco Engineering was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 32.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
LSE:SPX Historic Dividend August 14th 2022

Spirax-Sarco Engineering Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was £0.528 in 2012, and the most recent fiscal year payment was £1.36. This implies that the company grew its distributions at a yearly rate of about 9.9% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. 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. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Spirax-Sarco Engineering's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 15 Spirax-Sarco Engineering analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Spirax-Sarco Engineering not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.