Spire (NYSE:SR) Will Pay A Larger Dividend Than Last Year At $0.755

Spire Inc. (NYSE:SR) will increase its dividend on the 3rd of January to $0.755, which is 4.9% higher than last year's payment from the same period of $0.72. Based on this payment, the dividend yield for the company will be 4.7%, which is fairly typical for the industry.

See our latest analysis for Spire

Spire's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Spire was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Over the next year, EPS is forecast to expand by 28.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 63%, which is in the range that makes us comfortable with the sustainability of the dividend.

Spire Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $1.70, compared to the most recent full-year payment of $2.88. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. In the last five years, Spire's earnings per share has shrunk at approximately 2.6% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Spire's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Spire (of which 1 is significant!) you should know about. 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.