Sea Harvest Group's (JSE:SHG) Dividend Will Be Increased To R0.56

Sea Harvest Group Limited (JSE:SHG) has announced that it will be increasing its dividend on the 11th of April to R0.56, which will be 24% higher than last year. Although the dividend is now higher, the yield is only 3.8%, which is below the industry average.

Check out our latest analysis for Sea Harvest Group

Sea Harvest Group's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Sea Harvest Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 4.7% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 39%, which is comfortable for the company to continue in the future.

Sea Harvest Group Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The dividend has gone from R0.31 in 2018 to the most recent annual payment of R0.45. This means that it has been growing its distributions at 9.8% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Sea Harvest Group to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Sea Harvest Group has grown earnings per share at 45% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Sea Harvest Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Sea Harvest Group that you should be aware of before investing. Is Sea Harvest Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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