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The board of Science Applications International Corporation (NYSE:SAIC) has announced that it will pay a dividend of US$0.37 per share on the 29th of October. This makes the dividend yield 1.7%, which will augment investor returns quite nicely.
Science Applications International's Earnings Easily Cover the Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Science Applications International's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 6.0%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.
Science Applications International Is Still Building Its Track Record
It is great to see that Science Applications International has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2013, the dividend has gone from US$1.12 to US$1.48. This means that it has been growing its distributions at 3.5% per annum over that time. Science Applications International hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
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 Science Applications International has grown earnings per share at 11% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Science Applications International Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Science Applications International that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.
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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