Olympia Financial Group (TSE:OLY) Has Affirmed Its Dividend Of CA$0.23

The board of Olympia Financial Group Inc. (TSE:OLY) has announced that it will pay a dividend on the 30th of July, with investors receiving CA$0.23 per share. This means the annual payment is 5.8% of the current stock price, which is above the average for the industry.

View our latest analysis for Olympia Financial Group

Olympia Financial Group's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Olympia Financial Group was paying out 91% of earnings, but a comparatively small 52% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS could expand by 10.3% if the company continues along the path it has been on recently. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 84%, which is on the higher side, but certainly still feasible.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2011, the first annual payment was CA$2.00, compared to the most recent full-year payment of CA$2.76. This works out to be a compound annual growth rate (CAGR) of approximately 3.3% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Could Be Constrained

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Olympia Financial Group has impressed us by growing EPS at 10% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On Olympia Financial Group's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Olympia Financial Group that you should be aware of before investing. 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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