Tempur Sealy International's (NYSE:TPX) Dividend Will Be $0.11

The board of Tempur Sealy International, Inc. (NYSE:TPX) has announced that it will pay a dividend on the 6th of June, with investors receiving $0.11 per share. Including this payment, the dividend yield on the stock will be 1.2%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Tempur Sealy International

Tempur Sealy International's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, based ont he last payment, Tempur Sealy International was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

The next year is set to see EPS grow by 51.1%. 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.

Tempur Sealy International Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the dividend has gone from $0.28 total annually to $0.44. This means that it has been growing its distributions at 25% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Tempur Sealy International has seen EPS rising for the last five years, at 24% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Tempur Sealy International has 2 warning signs (and 1 which is significant) we think you should know about. Is Tempur Sealy International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.