Sun Life Financial's (TSE:SLF) Shareholders Will Receive A Bigger Dividend Than Last Year

Sun Life Financial Inc. (TSE:SLF) will increase its dividend from last year's comparable payment on the 30th of June to CA$0.75. This makes the dividend yield about the same as the industry average at 4.4%.

See our latest analysis for Sun Life Financial

Sun Life Financial's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Sun Life Financial's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 1.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 an annual total of CA$1.44 in 2013 to the most recent total annual payment of CA$2.88. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

We Could See Sun Life Financial's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Sun Life Financial has grown earnings per share at 8.1% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Sun Life Financial Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 7 Sun Life Financial analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Sun Life Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.