Grupo Security (SNSE:SECURITY) Is Increasing Its Dividend To CLP8.50

Grupo Security S.A. (SNSE:SECURITY) has announced that it will be increasing its periodic dividend on the 2nd of November to CLP8.50, which will be 31% higher than last year's comparable payment amount of CLP6.50. This makes the dividend yield about the same as the industry average at 8.0%.

Check out our latest analysis for Grupo Security

Grupo Security's Earnings Will Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time.

Having distributed dividends for at least 10 years, Grupo Security has a long history of paying out a part of its earnings to shareholders. Based on Grupo Security's last earnings report, the payout ratio is at a decent 26%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS could expand by 13.9% if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CLP10.25 in 2013 to the most recent total annual payment of CLP17.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Grupo Security has grown earnings per share at 14% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Grupo Security's prospects of growing its dividend payments in the future.

We Really Like Grupo Security's Dividend

Overall, a dividend increase is always good, and we think that Grupo Security is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Grupo Security that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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