South Port New Zealand (NZSE:SPN) Has Affirmed Its Dividend Of NZ$0.0882

South Port New Zealand Limited (NZSE:SPN) will pay a dividend of NZ$0.0882 on the 7th of March. This makes the dividend yield 4.6%, which will augment investor returns quite nicely.

See our latest analysis for South Port New Zealand

South Port New Zealand's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, South Port New Zealand was paying out 70% of earnings and more than 75% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

EPS is set to grow by 0.6% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 83%, which is on the higher side, but certainly still feasible.

South Port New Zealand Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from NZ$0.22 total annually to NZ$0.27. This works out to be a compound annual growth rate (CAGR) of approximately 2.1% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Although it's important to note that South Port 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. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

Our Thoughts On South Port New Zealand's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about South Port New Zealand's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments South Port New Zealand has been making. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, South Port New Zealand has 3 warning signs (and 1 which doesn't sit too well with us) we think 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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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.