Enpro (NYSE:NPO) Is Increasing Its Dividend To $0.30

Enpro Inc.'s (NYSE:NPO) dividend will be increasing from last year's payment of the same period to $0.30 on 20th of March. Despite this raise, the dividend yield of 0.8% is only a modest boost to shareholder returns.

See our latest analysis for Enpro

Enpro Doesn't Earn Enough To Cover Its Payments

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, the company was paying out 224% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 15%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share is forecast to rise by 75.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 139%, which probably can't continue without putting some pressure on the balance sheet.

Enpro Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 9 years was $0.80 in 2015, and the most recent fiscal year payment was $1.20. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Enpro's Dividend Might Lack Growth

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Enpro has been growing its earnings per share at 22% a year over the past five years. EPS has been growing well, but Enpro has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Our Thoughts On Enpro's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Enpro's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Enpro that investors should take into consideration. 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.