SunCoke Energy (NYSE:SXC) Will Pay A Larger Dividend Than Last Year At $0.08

SunCoke Energy, Inc.'s (NYSE:SXC) dividend will be increasing from last year's payment of the same period to $0.08 on 1st of September. This will take the dividend yield to an attractive 4.8%, providing a nice boost to shareholder returns.

See our latest analysis for SunCoke Energy

SunCoke Energy's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, SunCoke Energy's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 35.8%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 38%, which we are pretty comfortable with and we think is feasible on an earnings basis.

SunCoke Energy's Dividend Has Lacked Consistency

It's comforting to see that SunCoke Energy has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of $0.234 in 2014 to the most recent total annual payment of $0.32. This implies that the company grew its distributions at a yearly rate of about 4.0% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. SunCoke Energy's earnings per share has shrunk at 20% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On SunCoke Energy's Dividend

Overall, we always like to see the dividend being raised, but we don't think SunCoke Energy will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think SunCoke Energy is a great stock to add to your portfolio if income is your focus.

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. Case in point: We've spotted 3 warning signs for SunCoke Energy (of which 1 is a bit concerning!) you should know about. Is SunCoke Energy 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.