Energizer Holdings (NYSE:ENR) has announced it will maintain its dividend payout, offering a $0.30 per share distribution to shareholders on December 14th, yielding a 3.5% return on its stock. This decision comes even as the company faces a projected 41.5% drop in earnings per share (EPS) in the coming year, which could lead to unprofitability.
Despite the concerning forecast for EPS, Energizer's dividends seem short-term sustainable, backed by healthy free cash flows that not only support current payouts but also allow for reinvestment. The company's reliance on cash flow over traditional profit metrics is a key factor in maintaining its current cash payout ratio.
Over the past eight years, since 2015, Energizer has consistently paid dividends, showing an annual growth rate of 2.3%, climbing from $1.00 to $1.20. Yet, with a relatively short history of dividend payments, caution is advised before depending on the company for steady income.
The five-year trend shows a significant decline in EPS at an average of 41% annually. This decline raises concerns about the long-term sustainability of dividend payments unless there is an uptick in EPS performance. While there has been no cut in the dividend and it appears to be manageable in the short term due to adequate cash flow coverage, questions about its longevity persist.
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