Genworth Mortgage Insurance Australia's (ASX:GMA) Upcoming Dividend Will Be Larger Than Last Year's

Genworth Mortgage Insurance Australia Limited (ASX:GMA) will increase its dividend from last year's comparable payment on the 31st of August to A$0.12. This will take the dividend yield to an attractive 8.0%, providing a nice boost to shareholder returns.

Check out our latest analysis for Genworth Mortgage Insurance Australia

Genworth Mortgage Insurance Australia's Earnings Will Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having paid out dividends for 8 years, Genworth Mortgage Insurance Australia has a good history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Genworth Mortgage Insurance Australia's payout ratio of 64% is a good sign for current shareholders as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 25.3%. Analysts estimate the future payout ratio could reach 76% over that same time period, which is on the higher side, but certainly still feasible.

Genworth Mortgage Insurance Australia's Dividend Has Lacked Consistency

It's comforting to see that Genworth Mortgage Insurance Australia has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2014, the dividend has gone from A$0.0655 total annually to A$0.24. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Genworth Mortgage Insurance Australia Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Genworth Mortgage Insurance Australia has impressed us by growing EPS at 5.7% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On Genworth Mortgage Insurance Australia's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Genworth Mortgage Insurance Australia (of which 1 doesn't sit too well with us!) you should know about. Is Genworth Mortgage Insurance Australia 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.