Yahoo Finance Sensata Technologies Holding (NYSE:ST) Has Announced A Dividend Of $0.12
Sensata Technologies Holding plc (NYSE:ST) has announced that it will pay a dividend of $0.12 per share on the 28th of August. This means the annual payment will be 1.3% of the current stock price, which is lower than the industry average.
View our latest analysis for Sensata Technologies Holding
Sensata Technologies Holding Is Paying Out More Than It Is Earning
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. While Sensata Technologies Holding is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
The next 12 months is set to see EPS grow by 158.9%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.
Sensata Technologies Holding Doesn't Have A Long Payment History
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.44 in 2022 to the most recent total annual payment of $0.48. This implies that the company grew its distributions at a yearly rate of about 4.4% over that duration. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Sensata Technologies Holding's EPS has fallen by approximately 16% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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 becomes a long term trend.
Sensata Technologies Holding's Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Sensata Technologies Holding that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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