U.S. markets closed
  • S&P 500

    3,585.62
    -54.85 (-1.51%)
     
  • Dow 30

    28,725.51
    -500.10 (-1.71%)
     
  • Nasdaq

    10,575.62
    -161.89 (-1.51%)
     
  • Russell 2000

    1,664.72
    -10.21 (-0.61%)
     
  • Crude Oil

    79.74
    -1.49 (-1.83%)
     
  • Gold

    1,668.30
    -0.30 (-0.02%)
     
  • Silver

    19.01
    +0.30 (+1.62%)
     
  • EUR/USD

    0.9801
    -0.0018 (-0.19%)
     
  • 10-Yr Bond

    3.8040
    +0.0570 (+1.52%)
     
  • GBP/USD

    1.1166
    +0.0043 (+0.38%)
     
  • USD/JPY

    144.7200
    +0.2770 (+0.19%)
     
  • BTC-USD

    19,294.72
    -127.13 (-0.65%)
     
  • CMC Crypto 200

    443.49
    +0.06 (+0.01%)
     
  • FTSE 100

    6,893.81
    +12.22 (+0.18%)
     
  • Nikkei 225

    25,937.21
    -484.84 (-1.83%)
     

Skellerup Holdings (NZSE:SKL) Is Increasing Its Dividend To NZ$0.1415

·3 min read

The board of Skellerup Holdings Limited (NZSE:SKL) has announced that it will be paying its dividend of NZ$0.1415 on the 14th of October, an increased payment from last year's comparable dividend. This will take the annual payment to 3.6% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Skellerup Holdings

Skellerup Holdings' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Skellerup Holdings' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 124% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Earnings per share is forecast to rise by 28.8% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 80% which is a bit high but can definitely be sustainable.

historic-dividend
historic-dividend

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the annual payment back then was NZ$0.07, compared to the most recent full-year payment of NZ$0.205. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year 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.

Skellerup Holdings' Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Skellerup Holdings has impressed us by growing EPS at 16% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Skellerup Holdings' Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Skellerup Holdings will make a great income stock. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Skellerup Holdings that investors need to be conscious of moving forward. Is Skellerup Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here