Olympia Financial Group (TSE:OLY) Will Pay A Dividend Of CA$0.23

Olympia Financial Group Inc. (TSE:OLY) will pay a dividend of CA$0.23 on the 30th of September. 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 Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Olympia Financial Group's dividend made up quite a large proportion of earnings but only 59% of free cash flows. 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.

EPS is set to grow by 8.1% over the next year if recent trends continue. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 88%, which is on the higher side, but certainly still feasible.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was CA$2.00 in 2011, and the most recent fiscal year payment was CA$2.76. This works out to be a compound annual growth rate (CAGR) of approximately 3.3% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

We Could See Olympia Financial Group's Dividend Growing

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. It's encouraging to see Olympia Financial Group has been growing its earnings per share at 8.1% a 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. For example, we've picked out 2 warning signs for Olympia Financial Group that investors should know about before committing capital to this stock. 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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