Sea Harvest Group's (JSE:SHG) Upcoming Dividend Will Be Larger Than Last Year's

Sea Harvest Group Limited's (JSE:SHG) dividend will be increasing from last year's payment of the same period to ZAR0.40 on 8th of April. This takes the annual payment to 4.6% of the current stock price, which is about average for the industry.

See our latest analysis for Sea Harvest Group

Sea Harvest Group's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Sea Harvest Group was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Unless the company can turn things around, EPS could fall by 1.9% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 41%, which is definitely feasible to continue.

Sea Harvest Group's Dividend Has Lacked Consistency

Looking back, Sea Harvest Group's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the dividend has gone from ZAR0.31 total annually to ZAR0.40. This works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Sea Harvest Group May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Sea Harvest Group hasn't seen much change in its earnings per share over the last five years.

Sea Harvest Group's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Sea Harvest Group will make a great income stock. While Sea Harvest Group is earning enough to cover the payments, the cash flows are lacking. We don't think Sea Harvest Group is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Sea Harvest Group (2 make us uncomfortable!) that you should be aware of before investing. 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.