Washington H. Soul Pattinson's (ASX:SOL) Dividend Will Be Increased To AU$0.36

By
Simply Wall St
Published
October 13, 2021
ASX:SOL
Source: Shutterstock

Washington H. Soul Pattinson and Company Limited's (ASX:SOL) dividend will be increasing to AU$0.36 on 14th of December. Based on the announced payment, the dividend yield for the company will be 1.8%, which is fairly typical for the industry.

View our latest analysis for Washington H. Soul Pattinson

Washington H. Soul Pattinson's Earnings Easily Cover the Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Washington H. Soul Pattinson's 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.

The next year is set to see EPS grow by 49.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 57% by next year, which is in a pretty sustainable range.

historic-dividend
ASX:SOL Historic Dividend October 14th 2021

Washington H. Soul Pattinson Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was AU$0.34 in 2011, and the most recent fiscal year payment was AU$0.62. This means that it has been growing its distributions at 6.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, Washington H. Soul Pattinson has only grown its earnings per share at 3.9% per annum over the past five years. Growth of 3.9% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

We'd also point out that Washington H. Soul Pattinson has issued stock equal to 51% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Washington H. Soul Pattinson Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Washington H. Soul Pattinson (2 are potentially serious!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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