Olympia Financial Group (TSE:OLY) Will Pay A Dividend Of CA$0.60

Olympia Financial Group Inc.'s (TSE:OLY) investors are due to receive a payment of CA$0.60 per share on 31st of March. This makes the dividend yield 7.1%, which will augment investor returns quite nicely.

View our latest analysis for Olympia Financial Group

Olympia Financial Group's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Olympia Financial Group's was paying out quite a large proportion of earnings and 84% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Looking forward, earnings per share is forecast to fall by 7.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 86%, which is definitely on the higher side.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CA$2.60 in 2015, and the most recent fiscal year payment was CA$7.20. This implies that the company grew its distributions at a yearly rate of about 11% 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Olympia Financial Group has impressed us by growing EPS at 20% per year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Olympia Financial Group is not retaining those earnings to reinvest in growth.

Our Thoughts On Olympia Financial Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Olympia Financial Group's payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Olympia Financial Group (1 is a bit unpleasant!) 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 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.