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 on the 2nd of December, with investors receiving $0.41 per share. Based on this payment, the dividend yield will be 2.1%, which is fairly typical for the industry.

Check out our latest analysis for Sensient Technologies

Sensient Technologies' Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last payment made up 78% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 110.6% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 39% which brings it into quite a comfortable 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 2014, the annual payment back then was $0.92, compared to the most recent full-year payment of $1.64. This means that it has been growing its distributions at 6.0% per annum 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 Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Sensient Technologies has seen earnings per share falling at 7.7% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Sensient Technologies' Dividend

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. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Sensient Technologies that investors need to be conscious of moving forward. 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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