Stock Analysis

STERIS (NYSE:STE) Will Pay A Larger Dividend Than Last Year At $0.47

NYSE:STE
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STERIS plc's (NYSE:STE) periodic dividend will be increasing on the 23rd of September to $0.47, with investors receiving 9.3% more than last year's $0.43. Although the dividend is now higher, the yield is only 0.8%, which is below the industry average.

Check out our latest analysis for STERIS

STERIS' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last dividend was quite easily covered by STERIS' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 104.5%. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NYSE:STE Historic Dividend August 18th 2022

STERIS Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was $0.68, compared to the most recent full-year payment of $1.72. This implies that the company grew its distributions at a yearly rate of about 9.7% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. STERIS has seen EPS rising for the last five years, at 22% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that STERIS could prove to be a strong dividend payer.

We Really Like STERIS' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 1 warning sign for STERIS that you should be aware of before investing. Is STERIS not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Valuation is complex, but we're helping make it simple.

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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.