Sandon Capital Investments (ASX:SNC) Is Due To Pay A Dividend Of A$0.0275

The board of Sandon Capital Investments Limited (ASX:SNC) has announced that it will pay a dividend on the 7th of November, with investors receiving A$0.0275 per share. The dividend yield will be 6.5% based on this payment which is still above the industry average.

Check out our latest analysis for Sandon Capital Investments

Sandon Capital Investments' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Sandon Capital Investments' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 5.1% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 59%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was A$0.04, compared to the most recent full-year payment of A$0.055. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Sandon Capital Investments' earnings per share has fallen at approximately 5.1% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Sandon Capital Investments' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Sandon Capital Investments that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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