Sensata Technologies Holding's (NYSE:ST) Shareholders Will Receive A Bigger Dividend Than Last Year

Sensata Technologies Holding plc (NYSE:ST) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of August to $0.12. This takes the annual payment to 1.1% of the current stock price, which is about average for the industry.

View our latest analysis for Sensata Technologies Holding

Sensata Technologies Holding's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Sensata Technologies Holding was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 48.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 12% by next year, which is in a pretty sustainable range.

Sensata Technologies Holding Doesn't Have A Long Payment History

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Sensata Technologies Holding May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, Sensata Technologies Holding's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Sensata Technologies Holding's Dividend

Overall, we always like to see the dividend being raised, but we don't think Sensata Technologies Holding will make a great income stock. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Sensata Technologies Holding 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.