Sensient Technologies (NYSE:SXT) Is Due To Pay 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 March. This means the dividend yield will be fairly typical at 2.2%.

See our latest analysis for Sensient Technologies

Sensient Technologies' Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Sensient Technologies' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 26.1%. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

Sensient Technologies Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.88 in 2013 to the most recent total annual payment of $1.64. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Sensient Technologies has impressed us by growing EPS at 6.2% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On Sensient Technologies' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Sensient Technologies is earning enough to cover the payments, the cash flows are lacking. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Sensient Technologies (of which 1 can'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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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.