Sensient Technologies (NYSE:SXT) Has Announced A Dividend Of $0.41

The board of Sensient Technologies Corporation (NYSE:SXT) has announced that it will pay a dividend of $0.41 per share on the 1st of December. This means the annual payment is 2.8% of the current stock price, which is above the average for the industry.

View our latest analysis for Sensient Technologies

Sensient Technologies' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, Sensient Technologies is earning enough to cover the payment, but then it makes up 801% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

The next year is set to see EPS grow by 38.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.

Sensient Technologies Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $0.88 total annually to $1.64. This means that it has been growing its distributions at 6.4% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Sensient Technologies May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Unfortunately, Sensient Technologies' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Sensient Technologies' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Sensient Technologies (of which 1 shouldn't be ignored!) you should know about. 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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