Stock Analysis

Sun Life Financial (TSE:SLF) Has Re-Affirmed Its Dividend Of CA$0.55

  •  Updated
TSX:SLF
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Sun Life Financial Inc.'s (TSE:SLF) investors are due to receive a payment of CA$0.55 per share on 29th of September. This payment means that the dividend yield will be 3.3%, which is around the industry average.

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Sun Life Financial's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Sun Life Financial's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 6.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

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TSX:SLF Historic Dividend August 22nd 2021

Sun Life Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from CA$1.44 in 2011 to the most recent annual payment of CA$2.20. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

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. Sun Life Financial has impressed us by growing EPS at 11% per year over the past five years. Sun Life Financial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Sun Life 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. All in all, this checks a lot of the boxes we look for when choosing an 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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 12 analysts we track are forecasting for Sun Life Financial for free with public analyst estimates for the company. 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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