Energizer Holdings (NYSE:ENR) Is Due To Pay A Dividend Of US$0.30

Energizer Holdings, Inc. (NYSE:ENR) has announced that it will pay a dividend of US$0.30 per share on the 17th of June. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.

See our latest analysis for Energizer Holdings

Energizer Holdings' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Energizer Holdings' earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, EPS could fall by 4.7% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 57%, which is definitely feasible to continue.

Energizer Holdings Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2015, the dividend has gone from US$1.00 to US$1.20. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Energizer Holdings May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Energizer Holdings' earnings per share has shrunk at approximately 4.7% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Energizer Holdings' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. To that end, Energizer Holdings has 5 warning signs (and 2 which are significant) we think you should know about. Is Energizer Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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