Washington H. Soul Pattinson's (ASX:SOL) Shareholders Will Receive A Bigger Dividend Than Last Year

Washington H. Soul Pattinson and Company Limited (ASX:SOL) has announced that it will be increasing its dividend on the 13th of May to AU$0.29. Even though the dividend went up, the yield is still quite low at only 2.3%.

Check out our latest analysis for Washington H. Soul Pattinson

Washington H. Soul Pattinson Might Find It Hard To Continue The Dividend

Even a low dividend yield can be attractive if it is sustained for years on end. Washington H. Soul Pattinson is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Looking forward, earnings per share is forecast to expand by 99.2% over the next year. It's encouraging to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The healthy cash flows are definitely a good sign though, so we wouldn't panic just yet, especially with the earnings growing.

Washington H. Soul Pattinson Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was AU$0.40, compared to the most recent full-year payment of AU$0.65. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 2.3% per year. Earnings growth isn't particularly strong, and if the company isn't able to become profitable fairly soon, the dividend could come under pressure.

The company has also been raising capital by issuing stock equal to 51% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Washington H. Soul Pattinson that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.