EnerSys' (NYSE:ENS) Shareholders Will Receive A Bigger Dividend Than Last Year

EnerSys (NYSE:ENS) will increase its dividend from last year's comparable payment on the 29th of September to $0.225. Even though the dividend went up, the yield is still quite low at only 0.9%.

Check out 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 easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 27.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.

EnerSys 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 annual payment during the last 10 years was $0.50 in 2013, and the most recent fiscal year payment was $0.90. This implies that the company grew its distributions at a yearly rate of about 6.1% over that duration. 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. EnerSys has seen EPS rising for the last five years, at 13% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

EnerSys Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for EnerSys that investors should take into consideration. 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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