SThree's (LON:STEM) Dividend Will Be £0.092

SThree plc's (LON:STEM) investors are due to receive a payment of £0.092 per share on 6th of June. The dividend yield of 5.3% is still a nice boost to shareholder returns, despite the cut.

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SThree's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't 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.

Looking forward, earnings per share is forecast to fall by 34.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 57%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Check out our latest analysis for SThree

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of £0.14 in 2015 to the most recent total annual payment of £0.143. Its dividends have grown at less than 1% per annum over this time frame. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, SThree has only grown its earnings per share at 3.8% per annum over the past five years. If SThree is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

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. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for SThree (1 is a bit concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.