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Spirax-Sarco Engineering's (LON:SPX) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Spirax-Sarco Engineering plc (LON:SPX) has announced that it will be paying its dividend of £0.425 on the 11th of November, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.4%, which is below the industry average.

View our latest analysis for Spirax-Sarco Engineering

Spirax-Sarco Engineering's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Spirax-Sarco Engineering's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 32.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
historic-dividend

Spirax-Sarco Engineering Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from £0.528 total annually to £1.40. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Spirax-Sarco Engineering has seen EPS rising for the last five years, at 11% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Spirax-Sarco Engineering Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Spirax-Sarco Engineering is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 13 analysts we track are forecasting for Spirax-Sarco Engineering for free with public analyst estimates for the company. 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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