Stock Analysis

EnerSys (NYSE:ENS) Will Pay 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 24th of September, with investors receiving US$0.17 per share. This payment means the dividend yield will be 0.8%, which is below the average for the industry.

Check out our latest analysis for EnerSys

EnerSys' Earnings Easily Cover the Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, EnerSys' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 49.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 13% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:ENS Historic Dividend August 15th 2021

EnerSys Is Still Building Its Track Record

It is great to see that EnerSys has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The first annual payment during the last 8 years was US$0.50 in 2013, and the most recent fiscal year payment was US$0.70. This works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

EnerSys May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 3.5% per year. If EnerSys is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On EnerSys' Dividend

Overall, a consistent dividend is a good thing, and we think that EnerSys has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Taking the debate a bit further, we've identified 1 warning sign for EnerSys that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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