Sonic Automotive (NYSE:SAH) Has Announced That It Will Be Increasing Its Dividend To $0.38

Sonic Automotive, Inc.'s (NYSE:SAH) dividend will be increasing from last year's payment of the same period to $0.38 on 15th of October. This takes the annual payment to 1.9% of the current stock price, which is about average for the industry.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Sonic Automotive's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Sonic Automotive was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 103.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Sonic Automotive

Sonic Automotive Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $0.10 total annually to $1.52. This means that it has been growing its distributions at 31% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Sonic Automotive has been growing its earnings per share at 12% a year over the past five years. Sonic Automotive definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Sonic Automotive Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Sonic Automotive is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend 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. Case in point: We've spotted 2 warning signs for Sonic Automotive (of which 1 is potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.