Southern Cross Electrical Engineering (ASX:SXE) Will Pay A Dividend Of A$0.025

Southern Cross Electrical Engineering Limited's (ASX:SXE) investors are due to receive a payment of A$0.025 per share on 9th of April. This takes the annual payment to 3.3% of the current stock price, which is about average for the industry.

Check out our latest analysis for Southern Cross Electrical Engineering

Southern Cross Electrical Engineering's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Southern Cross Electrical Engineering was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 27.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, 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 one cut in the last 10 years. Since 2015, the dividend has gone from A$0.027 total annually to A$0.06. This implies that the company grew its distributions at a yearly rate of about 8.3% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Southern Cross Electrical Engineering might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Southern Cross Electrical Engineering has impressed us by growing EPS at 13% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Southern Cross Electrical Engineering Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Southern Cross Electrical Engineering is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Southern Cross Electrical Engineering that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.