Spectrum Brands Holdings (NYSE:SPB) Has Re-Affirmed Its Dividend Of US$0.42

Spectrum Brands Holdings, Inc. (NYSE:SPB) will pay a dividend of US$0.42 on the 14th of December. This payment means the dividend yield will be 1.6%, which is below the average for the industry.

View our latest analysis for Spectrum Brands Holdings

Spectrum Brands Holdings' 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. Prior to this announcement, the company was paying out 475% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 29%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Spectrum Brands Holdings' Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The dividend has gone from US$10.42 in 2017 to the most recent annual payment of US$1.68. The dividend has fallen 84% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

Spectrum Brands Holdings Might Find It Hard To Grow Its Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that Spectrum Brands Holdings has grown earnings per share at 29% per year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Spectrum Brands Holdings' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Spectrum Brands Holdings has 5 warning signs (and 1 which can't be ignored) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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.

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