SG Fleet Group's (ASX:SGF) Dividend Will Be Increased To A$0.096
SG Fleet Group Limited (ASX:SGF) has announced that it will be increasing its periodic dividend on the 20th of March to A$0.096, which will be 7.7% higher than last year's comparable payment amount of A$0.0891. This will take the dividend yield to an attractive 5.7%, providing a nice boost to shareholder returns.
See our latest analysis for SG Fleet Group
SG Fleet Group's Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, SG Fleet Group's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. We think that this practice can make the dividend quite risky in the future.
Over the next year, EPS is forecast to expand by 73.5%. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was A$0.04, compared to the most recent full-year payment of A$0.162. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. 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.
The Dividend's Growth Prospects Are Limited
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. SG Fleet Group hasn't seen much change in its earnings per share over the last five years.
SG Fleet Group's Dividend Doesn't Look Sustainable
Overall, we always like to see the dividend being raised, but we don't think SG Fleet Group will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.
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. For example, we've identified 2 warning signs for SG Fleet Group (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.
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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.
