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- NZSE:SPK
Spark New Zealand's (NZSE:SPK) Dividend Will Be NZ$0.1471
Spark New Zealand Limited (NZSE:SPK) has announced that it will pay a dividend of NZ$0.1471 per share on the 7th of October. This means that the annual payment will be 5.0% of the current stock price, which is in line with the average for the industry.
See our latest analysis for Spark New Zealand
Spark New Zealand Is Paying Out More Than It Is Earning
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Earnings per share is forecast to rise by 28.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 107%, which probably can't continue without putting some pressure on the balance sheet.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of NZ$0.18 in 2012 to the most recent total annual payment of NZ$0.27. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend's Growth Prospects Are Limited
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Although it's important to note that Spark New Zealand's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
Spark New Zealand's Dividend Doesn't Look Great
In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Spark New Zealand (of which 1 makes us a bit uncomfortable!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
About NZSE:SPK
Spark New Zealand
Provides telecommunications and digital services in New Zealand.
Average dividend payer with mediocre balance sheet.
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