The board of Stryker Corporation (NYSE:SYK) has announced that it will pay a dividend on the 31st of October, with investors receiving $0.80 per share. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.
Check out our latest analysis for Stryker
Stryker's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Stryker 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.
The next year is set to see EPS grow by 38.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.
Stryker Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.22 in 2014 to the most recent total annual payment of $3.20. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Stryker May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Stryker hasn't seen much change in its earnings per share over the last five years.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Stryker 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.
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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.
About NYSE:SYK
Solid track record with adequate balance sheet and pays a dividend.
