Skellerup Holdings (NZSE:SKL) Has Announced A Dividend Of NZ$0.0925

The board of Skellerup Holdings Limited (NZSE:SKL) has announced that it will pay a dividend on the 14th of March, with investors receiving NZ$0.0925 per share. This will take the annual payment to 5.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Skellerup Holdings

Skellerup Holdings' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Skellerup Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Earnings per share is forecast to rise by 24.2% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 86% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was NZ$0.08 in 2014, and the most recent fiscal year payment was NZ$0.22. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Skellerup Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Skellerup Holdings has impressed us by growing EPS at 11% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Skellerup Holdings Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 1 warning sign for Skellerup Holdings that investors need to be conscious of moving forward. Is Skellerup Holdings 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.