Schaffer (ASX:SFC) Has Re-Affirmed Its Dividend Of AU$0.45

The board of Schaffer Corporation Limited (ASX:SFC) has announced that it will pay a dividend of AU$0.45 per share on the 11th of March. This means the annual payment is 4.3% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Schaffer

Schaffer's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Schaffer's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share could rise by 95.2% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was AU$0.20 in 2012, and the most recent fiscal year payment was AU$0.90. This means that it has been growing its distributions at 16% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Schaffer has seen EPS rising for the last five years, at 95% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Schaffer could prove to be a strong dividend payer.

We Really Like Schaffer's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Schaffer that investors should take into consideration. Is Schaffer 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.