Stock Analysis

EnerSys (NYSE:ENS) Has Announced A Dividend Of US$0.17

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NYSE:ENS
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The board of EnerSys (NYSE:ENS) has announced that it will pay a dividend on the 31st of December, with investors receiving US$0.17 per share. This means the annual payment will be 0.9% of the current stock price, which is lower than the industry average.

View our latest analysis for EnerSys

EnerSys' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, EnerSys was paying a whopping 272% as a dividend, but this only made up 20% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

The next year is set to see EPS grow by 38.5%. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NYSE:ENS Historic Dividend November 14th 2021

EnerSys Doesn't Have A Long Payment History

EnerSys' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2013, the first annual payment was US$0.50, compared to the most recent full-year payment of US$0.70. This means that it has been growing its distributions at 4.3% per annum over that time. EnerSys hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

EnerSys May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 2.8% per year. While EPS growth is quite low, EnerSys has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On EnerSys' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about EnerSys' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for EnerSys (of which 1 is significant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

What are the risks and opportunities for EnerSys?

EnerSys provides various stored energy solutions for industrial applications worldwide.

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Rewards

  • Trading at 62.2% below our estimate of its fair value

  • Earnings are forecast to grow 37.67% per year

Risks

  • Debt is not well covered by operating cash flow

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