South Jersey Industries (NYSE:SJI) Has Affirmed Its Dividend Of US$0.30

South Jersey Industries, Inc. (NYSE:SJI) has announced that it will pay a dividend of US$0.30 per share on the 4th of October. This means the annual payment is 4.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for South Jersey Industries

South Jersey Industries' Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, South Jersey Industries was paying out 137% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Earnings per share is forecast to rise by 85.0% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 77%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

South Jersey Industries Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2011, the dividend has gone from US$0.73 to US$1.21. This means that it has been growing its distributions at 5.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. In the last five years, South Jersey Industries' earnings per share has shrunk at approximately 9.3% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for South Jersey Industries you should be aware of, and 1 of them doesn't sit too well with us. 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. 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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