Olympia Financial Group's (TSE:OLY) Dividend Will Be CA$0.23

Olympia Financial Group Inc.'s (TSE:OLY) investors are due to receive a payment of CA$0.23 per share on 31st of August. This means the annual payment is 5.9% 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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. 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.

Earnings per share could rise by 10.3% over the next year if things go the same way as they have for the last few years. 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 means that it has been growing its distributions at 3.3% per annum 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.

Olympia Financial Group Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Olympia Financial Group has grown earnings per share 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Olympia Financial Group that investors should take into consideration. 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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