SThree (LON:STEM) Has Announced A Dividend Of £0.092

SThree plc's (LON:STEM) investors are due to receive a payment of £0.092 per share on 6th of June. However, the dividend yield of 5.8% is still a decent boost to shareholder returns.

Check out our latest analysis for SThree

SThree's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, SThree was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 29.8%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 53%, which is comfortable for the company to continue in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.14 in 2015, and the most recent fiscal year payment was £0.143. Dividend payments have grown at less than 1% a year over this period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, SThree has only grown its earnings per share at 3.8% per annum over the past five years. While growth may be thin on the ground, SThree could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On SThree's Dividend

Overall, we think that SThree could make a reasonable income stock, even though it did cut the dividend this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for SThree you should be aware of, and 1 of them can't be ignored. Is SThree 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.