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Spectris' (LON:SXS) Upcoming Dividend Will Be Larger Than Last Year's

Spectris plc (LON:SXS) will increase its dividend on the 11th of November to £0.241, which is 4.8% higher than last year's payment from the same period of £0.23. This will take the annual payment to 2.5% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Spectris

Spectris' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 140% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

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Over the next year, EPS is forecast to fall by 9.7%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 45%, which is comfortable for the company to continue in the future.

historic-dividend
historic-dividend

Spectris Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was £0.291, compared to the most recent full-year payment of £0.718. This implies that the company grew its distributions at a yearly rate of about 9.5% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Spectris has been growing its earnings per share at 82% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Our Thoughts On Spectris' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Spectris' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Spectris that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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