Stock Analysis

Trinseo (NYSE:TSE) Is Paying Out A Dividend Of $0.32

  •  Updated
NYSE:TSE
Source: Shutterstock

Trinseo PLC (NYSE:TSE) will pay a dividend of $0.32 on the 20th of October. This makes the dividend yield 6.2%, which will augment investor returns quite nicely.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Trinseo's stock price has reduced by 49% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for Trinseo

Trinseo's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Trinseo's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, EPS could fall by 11.8% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 38%, which is definitely feasible to continue.

historic-dividend
NYSE:TSE Historic Dividend September 26th 2022

Trinseo's Dividend Has Lacked Consistency

Trinseo has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of $1.20 in 2016 to the most recent total annual payment of $1.28. This implies that the company grew its distributions at a yearly rate of about 1.1% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Trinseo's EPS has declined at around 12% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Trinseo's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Trinseo's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

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. For example, we've identified 5 warning signs for Trinseo (2 are a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

What are the risks and opportunities for Trinseo?

Trinseo PLC, a materials solutions provider, manufactures and sells plastics and latex binders in the United States, Europe, the Asia-Pacific, and internationally.

View Full Analysis

Rewards

  • Trading at 71.1% below our estimate of its fair value

Risks

  • Earnings have declined by 19.7% per year over past 5 years

  • Interest payments are not well covered by earnings

  • Significant insider selling over the past 3 months

View all Risks and Rewards

Share Price

Market Cap

1Y Return

View Company Report