Spectris (LON:SXS) Will Pay A Larger Dividend Than Last Year At £0.539

The board of Spectris plc (LON:SXS) has announced that it will be paying its dividend of £0.539 on the 28th of June, an increased payment from last year's comparable dividend. This makes the dividend yield 2.4%, which is above the industry average.

View our latest analysis for Spectris

Spectris' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Spectris' earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 41.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

Spectris Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of £0.403 in 2014 to the most recent total annual payment of £0.792. This implies that the company grew its distributions at a yearly rate of about 7.0% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

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. However, Spectris' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.