Skellerup Holdings (NZSE:SKL) Is Increasing Its Dividend To NZ$0.1687

The board of Skellerup Holdings Limited (NZSE:SKL) has announced that it will be paying its dividend of NZ$0.1687 on the 18th of October, an increased payment from last year's comparable dividend. This takes the dividend yield to 4.6%, which shareholders will be pleased with.

See our latest analysis for Skellerup Holdings

Skellerup Holdings' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Skellerup Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to grow by 40.7% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 85% which is a bit high but can definitely be sustainable.

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 implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

We Could See Skellerup Holdings' Dividend Growing

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. Skellerup Holdings has impressed us by growing EPS at 9.8% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Skellerup Holdings' Dividend

Overall, a dividend increase is always good, and we think that Skellerup Holdings 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 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. For instance, we've picked out 1 warning sign for Skellerup Holdings that investors should take into consideration. Is Skellerup Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.