Sandon Capital Investments (ASX:SNC) Has Affirmed Its Dividend Of AU$0.028

By
Simply Wall St
Published
August 24, 2021
ASX:SNC
Source: Shutterstock

The board of Sandon Capital Investments Limited (ASX:SNC) has announced that it will pay a dividend on the 5th of November, with investors receiving AU$0.028 per share. The dividend yield will be 5.0% based on this payment which is still above the industry average.

Check out our latest analysis for Sandon Capital Investments

Sandon Capital Investments Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Sandon Capital Investments was paying out 206% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

If the company can't turn things around, EPS could fall by 4.2% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 251%, which is definitely a bit high to be sustainable going forward.

historic-dividend
ASX:SNC Historic Dividend August 24th 2021

Sandon Capital Investments' Dividend Has Lacked Consistency

It's comforting to see that Sandon Capital Investments 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 first annual payment was AU$0.04, compared to the most recent full-year payment of AU$0.052. This means that it has been growing its distributions at 4.0% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Achieve

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. Sandon Capital Investments has seen earnings per share falling at 4.2% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

We're Not Big Fans Of Sandon Capital Investments' Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Sandon Capital Investments make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 5 warning signs for Sandon Capital Investments you should be aware of, and 1 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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