STERIS (NYSE:STE) Is Paying Out A Larger Dividend Than Last Year

The board of STERIS plc (NYSE:STE) has announced that it will be increasing its dividend by 11% on the 26th of September to $0.63, up from last year's comparable payment of $0.57. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

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STERIS' Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, STERIS' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 59.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

View our latest analysis for STERIS

STERIS Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.84 in 2015, and the most recent fiscal year payment was $2.28. This means that it has been growing its distributions at 11% per annum over that time. 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.

We Could See STERIS' Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. STERIS has impressed us by growing EPS at 5.2% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like STERIS' Dividend

Overall, a dividend increase is always good, and we think that STERIS is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for STERIS that you should be aware of before investing. 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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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.