Last update on 2024-06-27

Steris (STE) - Dividend Analysis (Final Score: 4/8)

Steris (STE) - Dividend analysis with 4/8 score. Examining stability, growth, and coverage of dividends for long-term investors.

Short Analysis - Dividend Score: 4

We're running Steris (STE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The analysis evaluates Steris (STE) based on 8 criteria to see how stable and effective their dividend policy is. These 8 criteria include dividend yield, growth rate, payout ratio, earnings coverage, cash flow coverage, and more. Steris' dividend yield is higher than the industry average but has experienced volatility in the past. Their average annual growth rate has been high but inconsistent, showing significant fluctuations year to year. Steris maintains an average payout ratio lower than 65%, a positive sign. Dividends have been generally well covered by both earnings and free cash flow, but with some years of concern. Steris has shown stable dividend payments since they started paying dividends and have maintained this for 18 years, just shy of the 25-year mark. Stock repurchase programs are also taken into consideration as they reflect financial health and a commitment to shareholders.

Insights for Value Investors Seeking Stable Income

Steris (STE) shows some strong points like a high dividend yield compared to the industry and a stable payout ratio. However, its history of dividend volatility and inconsistent growth rates could be worrying for investors looking for constant income. Although the dividends are well-covered and there is a pattern of reliable payments since 2005, the company hasn't reached the 25-year mark yet. Given these factors, if you are an investor seeking stable and consistent dividends, you might want to proceed with some caution. Steris could be worth exploring if you're okay with the potential fluctuations. Definitely look more into their financials and performance trends for better decision making.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield measures the ratio of a company's annual dividend compared to its share price. It provides investors with an idea of the income generated by their investment in relation to the stock's price.

Steris (STE) has a dividend yield of 0.9006%, which is higher than the industry average of 0.67%. Examining the past 20 years, Steris' dividend yield experienced significant volatility. For example, it was as high as 8.6164% in 2009 but has since stabilized closer to current levels. Overall, this is a positive trend as Steris offers a relatively better return in dividends compared to the industry average, although investors should be aware of past volatility.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate represents the annualized percentage rate of growth of a company's dividend payouts. A higher growth rate indicates sustained profitability and financial health.

Analyzing Steris' Dividend Growth Rate over the last 20 years indicates volatility. With years like 2006 exhibiting growth of 760.71% compared to 2007's -78.42% suggests instability. The average Dividend Growth Rate is 43.92%, which shows substantial growth but inconsistency and negative years cannot be ignored. Multi-year trends, including periods of low growth or decline (e.g., 2012-2020) suggest difficulties maintaining consistent dividends. Reliable dividend growth should be ideally stable and complement revenue growth. In light of this, Steris' varied growth reflects a less predictable dividend profile, raising concerns for yield-focused investors.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio represents the percentage of earnings a company distributes to its shareholders as dividends. A lower payout ratio indicates a company can sustain or even grow its dividend.

The average payout ratio for Steris (STE) over the last 20 years stands at around 47.76%, which is comfortably below the 65% threshold. This indicates that Steris has been able to distribute dividends while retaining a notable portion of its earnings to reinvest in the business. However, there are some noteworthy fluctuations: the payout spiked significantly in 2009 and again in 2023, reaching over 100%, which might raise concerns over dividend sustainability in those specific years. Overall, though, the trend is positive, showing that Steris generally maintains a healthy balance between rewarding shareholders and fueling future growth.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

Examining Steris from 2003 to 2023, there are marked fluctuations in the dividend coverage ratio. Equity-holders generally prefer higher earnings-per-share (EPS) to dividend-per-share (DPS) ratios, ensuring sustainability. The years 2007 experienced abnormal spikes with over earnings coverage. The latest year (2023) saw a remarkable improvement in coverage at 1.84. However, variability in EPS can challenge dividend sustainability. Generally, Steris falls mostly within the 0.3-0.9 range, suggesting moderate protection. This trend denotes instability which warrants cautious optimism.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow refers to the proportion of free cash flow (which is the cash a company generates through its operations) used to pay back dividends to shareholders. This metric is important as it indicates the financial health of a company and its ability to sustain dividend payments without jeopardizing its operations or growth initiatives.

Free cash flow is an indicator of a company's ability to generate surplus cash after covering its operational expenses and capital expenditures. For Steris, examining the period from 2003 to 2023, there is an overall positive trend in free cash flow, which increased from $74.7 million in 2003 to approximately $395 million in 2023. However, this increase is not consistent annually and displays fluctuations. Regarding dividends, Steris commenced dividend payouts in 2006 and observed a progressive increase in the payout amount, particularly noteworthy post-2010. For instance, from 2011 to 2023, the dividend payout surged from $33.2 million to $183.5 million. The ratio of dividends covered by cash flow trended upwards from 2006 onwards, reaching values like 0.4107 in 2022 (41% of free cash flow covering dividends). This is a positive indicator, suggesting that Steris is increasingly able to cover its dividend payout adequately with its free cash flow. However, some fluctuations and years of lower coverage like in 2007 (25%) and 2009 (almost 0.13%) signify periods where Steris had to be cautious in balancing its cash reserves. In the bigger picture, this trend is favorable for investors seeking dividend stability, as the overall majority of years indicate strong coverage where free cash flow comfortably meets the dividend payout amounts.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments is crucial for income-seeking investors because it ensures a reliable source of income, reducing risk in their financial planning.

Analyzing the dividend per share for Steris (STE) over the past 20 years, we observe a consistent upward trend without any year experiencing a drop of 20% or more. Starting from a dividend of $0.12 in 2005 to $1.98 in 2023, the growth reflects a strong and stable dividend policy. This consistency suggests that Steris is committed to rewarding its shareholders, which bodes well for income-seeking investors. Such stability mitigates financial risk, making it a positive indicator for potential investors looking for reliable dividend income.

Dividends Paid for Over 25 Years?

Companies with a long history of paying dividends often indicate stability and shareholder value focus.

Steris has paid dividends consistently since 2005, based on the data provided. This marks 18 years of dividend payments, not quite reaching the 25-year mark. However, the trend is positive, showing a commitment to returning capital to shareholders, with increasing dividend amounts annually. This trend is favorable for long-term investors seeking steady income.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Steris (STE) and why it is important to consider.

Reliable Stock Repurchases Over the Past 20 Years?The company's repurchase program reflects its commitment to returning capital to shareholders, an indicator of financial health.