Saputo's (TSE:SAP) Shareholders Will Receive A Bigger Dividend Than Last Year
Saputo Inc. (TSE:SAP) will increase its dividend from last year's comparable payment on the 15th of September to CA$0.185. This makes the dividend yield about the same as the industry average at 2.6%.
View our latest analysis for Saputo
Saputo's Earnings Easily Cover The Distributions
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Saputo was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 52.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.
Saputo Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$0.42 in 2013 to the most recent total annual payment of CA$0.74. This means that it has been growing its distributions at 5.8% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth May Be Hard To Come By
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Saputo has seen earnings per share falling at 6.0% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
Our Thoughts On Saputo's Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Saputo that investors need to be conscious of moving forward. Is Saputo not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
