Sensient Technologies (NYSE:SXT) Will 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. The dividend yield will be 2.6% based on this payment which is still above the industry average.

Check out our latest analysis for Sensient Technologies

Sensient Technologies' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments 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. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to expand by 34.1%. If the dividend continues on this path, the payout ratio could be 43% 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. Since 2014, the dividend has gone from $0.92 total annually to $1.64. This works out to be a compound annual growth rate (CAGR) of approximately 6.0% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, Sensient Technologies' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Sensient Technologies is earning enough to cover the payments, the cash flows are lacking. We don't think Sensient Technologies is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Sensient Technologies (1 shouldn't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.