Olympia Financial Group (TSE:OLY) Is Paying Out A Dividend Of CA$0.60

The board of Olympia Financial Group Inc. (TSE:OLY) has announced that it will pay a dividend on the 31st of July, with investors receiving CA$0.60 per share. This makes the dividend yield 5.9%, which will augment investor returns quite nicely.

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Olympia Financial Group's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, Olympia Financial Group was paying out 73% of earnings, but a comparatively small 70% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to fall by 8.6%. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 90%, meaning that most of the company's earnings are being paid out to shareholders.

See our latest analysis for Olympia Financial Group

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from CA$2.60 total annually to 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. Olympia Financial Group has impressed us by growing EPS at 22% per year over the past five years. However, Olympia Financial Group isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

We Really Like Olympia Financial Group's Dividend

Overall, we like to see the dividend staying consistent, and we think Olympia Financial Group might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Olympia Financial Group you should be aware of, and 1 of them is a bit concerning. 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.