Sensient Technologies (NYSE:SXT) Is Due To Pay A Dividend Of $0.41

Sensient Technologies Corporation (NYSE:SXT) will pay a dividend of $0.41 on the 1st of June. This means that the annual payment will be 2.2% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Sensient Technologies

Sensient Technologies' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Sensient Technologies' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 35.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

Sensient Technologies Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.88 in 2013, and the most recent fiscal year payment was $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, Sensient Technologies has only grown its earnings per share at 4.4% per annum over the past five years. Growth of 4.4% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Sensient Technologies' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Sensient Technologies has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Sensient Technologies 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.