Washington H. Soul Pattinson's (ASX:SOL) Dividend Will Be A$0.44

The board of Washington H. Soul Pattinson and Company Limited (ASX:SOL) has announced that it will pay a dividend on the 14th of May, with investors receiving A$0.44 per share. Despite this raise, the dividend yield of 2.8% is only a modest boost to shareholder returns.

Washington H. Soul Pattinson's Future Dividends May Potentially Be At Risk

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last dividend, Washington H. Soul Pattinson is earning enough to cover the payment, but then it makes up 111% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share is forecast to fall by 28.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 104%, which could put the dividend in jeopardy if the company's earnings don't improve.

View our latest analysis for Washington H. Soul Pattinson

Washington H. Soul Pattinson Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of A$0.48 in 2015 to the most recent total annual payment of A$0.95. This implies that the company grew its distributions at a yearly rate of about 7.1% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Washington H. Soul Pattinson has impressed us by growing EPS at 23% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Washington H. Soul Pattinson will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Washington H. Soul Pattinson has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. 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.