Steadfast Group (ASX:SDF) Will Pay A Larger Dividend Than Last Year At A$0.078

The board of Steadfast Group Limited (ASX:SDF) has announced that it will be paying its dividend of A$0.078 on the 9th of September, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 2.4%.

Check out our latest analysis for Steadfast Group

Steadfast Group's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. The last payment made up 73% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, earnings per share is forecast to rise by 22.9% over the next year. If the dividend continues on this path, the payout ratio could be 68% by next year, which we think can be pretty sustainable going forward.

Steadfast Group's Dividend Has Lacked Consistency

Steadfast Group has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2014, the annual payment back then was A$0.036, compared to the most recent full-year payment of A$0.13. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Steadfast Group has impressed us by growing EPS at 14% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Steadfast Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Steadfast Group that you should be aware of before investing. 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.