Stryker Corporation (NYSE:SYK) has announced that it will pay a dividend of $0.80 per share on the 30th of April. Despite this raise, the dividend yield of 0.9% is only a modest boost to shareholder returns.
See our latest analysis for Stryker
Stryker's Earnings Easily Cover The Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Stryker was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 51.5%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.
Stryker Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from $1.06 total annually to $3.20. This means that it has been growing its distributions at 12% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Stryker's EPS has declined at around 2.6% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.
Our Thoughts On Stryker's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Stryker that investors should take into consideration. Is Stryker 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.
About NYSE:SYK
Solid track record average dividend payer.
