Smurfit Kappa Group's (ISE:SK3) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Smurfit Kappa Group Plc (ISE:SK3) has announced that it will be paying its dividend of €0.335 on the 27th of October, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 3.8%.

See our latest analysis for Smurfit Kappa Group

Smurfit Kappa Group's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend was quite easily covered by Smurfit Kappa Group's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 10.4%. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from €0.15 total annually to €1.41. This means that it has been growing its distributions at 25% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Smurfit Kappa Group has grown earnings per share at 7.7% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Our Thoughts On Smurfit Kappa Group's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Smurfit Kappa Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.