Olympia Financial Group (TSE:OLY) Is Due To Pay A Dividend Of CA$0.60

Olympia Financial Group Inc. (TSE:OLY) will pay a dividend of CA$0.60 on the 31st of October. The dividend yield will be 6.6% based on this payment which is still above the industry average.

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Olympia Financial Group's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Olympia Financial Group was paying out 75% of earnings and more than 75% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Looking forward, earnings per share is forecast to fall by 5.3% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 89%, meaning that most of the company's earnings are being paid out to shareholders.

See our latest analysis for Olympia Financial Group

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was CA$2.60, compared to the most recent full-year payment of CA$7.20. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Olympia Financial Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Olympia Financial Group has been growing its earnings per share at 23% a year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Olympia Financial Group hasn't been doing.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Olympia Financial Group has been making. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Olympia Financial Group (of which 1 is significant!) you should know about. 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.