South Port New Zealand (NZSE:SPN) Will Pay A Larger Dividend Than Last Year At NZ$0.23

South Port New Zealand Limited's (NZSE:SPN) dividend will be increasing to NZ$0.23 on 9th of November. This will take the annual payment from 2.9% to 3.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for South Port New Zealand

South Port New Zealand's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment was quite easily covered by earnings, but it made up 150% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

EPS is set to grow by 4.2% over the next year if recent trends continue. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 76%, 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 2011, the first annual payment was NZ$0.20, compared to the most recent full-year payment of NZ$0.27. This means that it has been growing its distributions at 3.0% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

South Port New Zealand May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 4.2% per year. South Port New Zealand is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On South Port New Zealand's Dividend

Overall, we always like to see the dividend being raised, but we don't think South Port New Zealand will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think South Port New Zealand is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on South Port New Zealand management tenure, salary, and performance. We have also put together a list of global stocks with a solid dividend.

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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.
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