Stock Analysis

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

  •  Updated
TSX:SLF
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The board of Sun Life Financial Inc. (TSE:SLF) has announced that it will pay a dividend of CA$0.55 per share on the 31st of December. This payment means that the dividend yield will be 3.1%, which is around the industry average.

View our latest analysis for Sun Life Financial

Sun Life Financial's Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Sun Life Financial was paying only paying out a fraction of earnings, but the payment was a massive 107% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 2.3%. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

historic-dividend
TSX:SLF Historic Dividend November 7th 2021

Sun Life Financial Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was CA$1.44, compared to the most recent full-year payment of CA$2.20. This works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Sun Life Financial has impressed us by growing EPS at 10% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 11 analysts we track are forecasting for Sun Life Financial for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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