Sirius XM Holdings (NASDAQ:SIRI) Is Due To Pay A Dividend Of US$0.022

The board of Sirius XM Holdings Inc. (NASDAQ:SIRI) has announced that it will pay a dividend on the 25th of February, with investors receiving US$0.022 per share. This payment means the dividend yield will be 1.2%, which is below the average for the industry.

See our latest analysis for Sirius XM Holdings

Sirius XM Holdings' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Sirius XM Holdings' dividend made up quite a large proportion of earnings but only 23% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 25% which is fairly sustainable.

Sirius XM Holdings Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2017, the dividend has gone from US$0.04 to US$0.088. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Has Limited Growth Potential

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. Sirius XM Holdings' earnings per share has shrunk at 10% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Sirius XM Holdings' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Sirius XM Holdings' payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

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. Just as an example, we've come across 5 warning signs for Sirius XM Holdings you should be aware of, and 1 of them is significant. We have also put together a list of global stocks with a solid dividend.

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