E-L Financial Corporation Limited (TSE:ELF) has announced that it will pay a dividend of CA$2.50 per share on the 15th of July. This makes the dividend yield 14%, which will augment investor returns quite nicely.
E-L Financial's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, E-L Financial's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS could expand by 31.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.
E-L Financial Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from CA$0.50 to CA$10.00. This works out to be a compound annual growth rate (CAGR) of approximately 35% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. E-L Financial has seen EPS rising for the last five years, at 31% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like E-L Financial's Dividend
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in E-L Financial stock. 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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