DENTSPLY SIRONA Inc. (NASDAQ:XRAY) will pay a dividend of $0.16 on the 11th of April. This means the annual payment is 3.9% of the current stock price, which is above the average for the industry.

Check out our latest analysis for DENTSPLY SIRONA

Estimates Indicate DENTSPLY SIRONA's Dividend Coverage Likely To Improve

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. DENTSPLY SIRONA is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 3.0%, which we would be comfortable to see continuing.

DENTSPLY SIRONA Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.265 in 2015, and the most recent fiscal year payment was $0.64. This works out to be a compound annual growth rate (CAGR) of approximately 9.2% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. DENTSPLY SIRONA's earnings per share has shrunk at 44% a year over 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. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about DENTSPLY SIRONA's payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 DENTSPLY SIRONA that investors need to be conscious of moving forward. Is DENTSPLY SIRONA not quite the opportunity you were looking for? Why not check out our selection of top 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.