Washington H. Soul Pattinson's (ASX:SOL) Upcoming Dividend Will Be Larger Than Last Year's

By
Simply Wall St
Published
September 25, 2021
ASX:SOL
Source: Shutterstock

The board of Washington H. Soul Pattinson and Company Limited (ASX:SOL) has announced that it will be increasing its dividend on the 14th of December to AU$0.36. Despite this raise, the dividend yield of 1.6% is only a modest boost to shareholder returns.

See our latest analysis for Washington H. Soul Pattinson

Washington H. Soul Pattinson's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Washington H. Soul Pattinson's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 58.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
ASX:SOL Historic Dividend September 25th 2021

Washington H. Soul Pattinson Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. 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. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Washington H. Soul Pattinson has seen EPS rising for the last five years, at 13% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

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. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 is significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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