Trinseo PLC's (NYSE:TSE) investors are due to receive a payment of $0.01 per share on 24th of April. This means the annual payment will be 0.8% of the current stock price, which is lower than the industry average.

View our latest analysis for Trinseo

Trinseo's Distributions May Be Difficult To Sustain

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Even though Trinseo is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share could 55.8% over the next year if the trend of the last few years can't be broken. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Trinseo's Dividend Has Lacked Consistency

Trinseo has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 9 years was $1.20 in 2016, and the most recent fiscal year payment was $0.04. This works out to a decline of approximately 97% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Trinseo's EPS has declined at around 56% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Trinseo's Dividend Doesn't Look Great

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Trinseo has 4 warning signs (and 3 which are a bit unpleasant) we think you should know about. Is Trinseo not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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