Over the past 10 years SSE plc (LON:SSE) has grown its dividend payouts from £0.62 to £0.97. With a market cap of UK£11b, SSE pays out 72% of its earnings, leading to a 8.9% yield. Let me elaborate on you why the stock stands out for income investors like myself.
What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:
- It is paying an annual yield above 75% of dividend payers
- It has paid dividend every year without dramatically reducing payout in the past
- Its dividend per share amount has increased over the past
- It can afford to pay the current rate of dividends from its earnings
- It has the ability to keep paying its dividends going forward
High Yield And Dependable
SSE's yield sits at 8.9%, which is high for Electric Utilities stocks. But the real reason SSE stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you're investor who wants a robust cash inflow from your portfolio over a long period of time.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. In the case of SSE it has increased its DPS from £0.62 to £0.97 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes SSE a true dividend rockstar.
The current trailing twelve-month payout ratio for the stock is 72%, which means that the dividend is covered by earnings. Going forward, analysts expect SSE's payout to increase to 84% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 7.6%. However, EPS is forecasted to fall to £0.87 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
There aren't many other stocks out there with the same track record as SSE, so I would certainly recommend further examining the stock if its dividend characteristics appeal to you. However, given this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. I've put together three key aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SSE’s future growth? Take a look at our free research report of analyst consensus for SSE’s outlook.
- Valuation: What is SSE worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether SSE is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.