Yahoo Finance Steadfast Group's (ASX:SDF) Shareholders Will Receive A Bigger Dividend Than Last Year
The board of Steadfast Group Limited (ASX:SDF) has announced that it will be paying its dividend of A$0.078 on the 9th of September, an increased payment from last year's comparable dividend. This takes the annual payment to 2.4% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for Steadfast Group
Steadfast Group's Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before this announcement, Steadfast Group was paying out 73% of earnings, but a comparatively small 53% of free cash flows. This leaves plenty of cash for reinvestment into the business.
The next year is set to see EPS grow by 22.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 68% by next year, which is in a pretty sustainable range.
Steadfast Group's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the annual payment back then was A$0.036, compared to the most recent full-year payment of A$0.13. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Steadfast Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Steadfast Group has been growing its earnings per share at 14% a year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
Steadfast Group Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
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. For instance, we've picked out 2 warning signs for Steadfast Group that investors should take into consideration. Is Steadfast Group 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.
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