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Genworth Mortgage Insurance Australia Limited (ASX:GMA) will increase its dividend from last year's comparable payment on the 31st of August to A$0.12. This takes the dividend yield to 8.1%, which shareholders will be pleased with.
Genworth Mortgage Insurance Australia's Dividend Forecasted To Be Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.
Genworth Mortgage Insurance Australia has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 64%shows that Genworth Mortgage Insurance Australia would be able to pay its last dividend without pressure on the balance sheet.
Over the next 3 years, EPS is forecast to expand by 25.3%. Analysts estimate the future payout ratio could reach 76% over that same time period, which is on the higher side, but certainly still feasible.
Genworth Mortgage Insurance Australia's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of A$0.0655 in 2014 to the most recent total annual payment of A$0.24. This means that it has been growing its distributions at 18% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
Genworth Mortgage Insurance Australia Could Grow Its Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Genworth Mortgage Insurance Australia has grown earnings per share at 5.7% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Genworth Mortgage Insurance Australia (1 can't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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