Stock Analysis

Sun Life Financial (TSE:SLF) Will Pay A Dividend Of CA$0.55

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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. Based on this payment, the dividend yield will be 3.4%, which is fairly typical for the industry.

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Sun Life Financial's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, Sun Life Financial's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 6.4%. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

TSX:SLF Historic Dividend August 8th 2021

Sun Life Financial Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. 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 could be attracted to the stock based on the quality of its payment history. It's encouraging to see Sun Life Financial has been growing its earnings per share at 11% a 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

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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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