Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Suncorp Group Limited (ASX:SUN) is about to trade ex-dividend in the next two days. You will need to purchase shares before the 26th of August to receive the dividend, which will be paid on the 21st of October.
Suncorp Group’s next dividend payment will be AU$0.10 per share, and in the last 12 months, the company paid a total of AU$0.36 per share. Calculating the last year’s worth of payments shows that Suncorp Group has a trailing yield of 3.7% on the current share price of A$9.65. If you buy this business for its dividend, you should have an idea of whether Suncorp Group’s dividend is reliable and sustainable. So we need to investigate whether Suncorp Group can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Suncorp Group is paying out an acceptable 73% of its profit, a common payout level among most companies.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we’re discomforted by Suncorp Group’s 12% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Suncorp Group has seen its dividend decline 1.3% per annum on average over the past 10 years, which is not great to see.
To Sum It Up
Has Suncorp Group got what it takes to maintain its dividend payments? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. All things considered, we’re not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Having said that, if you’re looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Suncorp Group. For instance, we’ve identified 3 warning signs for Suncorp Group (1 can’t be ignored) you should be aware of.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
When trading Suncorp Group or any other investment, use the platform considered by many to be the Professional’s Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.