Spectris (LON:SXS) Is Paying Out A Larger Dividend Than Last Year

Spectris plc's (LON:SXS) dividend will be increasing from last year's payment of the same period to £0.539 on 28th of June. This takes the dividend yield to 2.4%, which shareholders will be pleased with.

See our latest analysis for Spectris

Spectris' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Spectris' earnings. 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 45.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

Spectris 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 dividend has gone from an annual total of £0.403 in 2014 to the most recent total annual payment of £0.792. This means that it has been growing its distributions at 7.0% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Spectris May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Unfortunately, Spectris' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Spectris' Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 12 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is Spectris 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.