Source Capital Inc (SOR): An In-depth Look at its Dividend Sustainability
Assessing the Dividend Performance and Future Prospects of Source Capital Inc
Source Capital Inc(NYSE:SOR) recently announced a dividend of $0.21 per share, payable on 2023-09-29, with the ex-dividend date set for 2023-09-15. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Source Capital Incs dividend performance and assess its sustainability.
Understanding Source Capital Inc
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Source Capital Inc is a diversified, closed-end management investment company. The investment objective of the company is to seek maximum total return for Common shareholders from both capital appreciation and investment income to the extent consistent with the protection of invested capital. Its investment portfolio includes a wide range of securities with a primary emphasis on common stock.
Unfolding Source Capital Inc's Dividend History
Source Capital Inc has maintained a consistent dividend payment record since 1985. Dividends are currently distributed on a monthly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Dissecting Source Capital Inc's Dividend Yield and Growth
As of today, Source Capital Inc currently has a 12-month trailing dividend yield of 5.89% and a 12-month forward dividend yield of 6.42%. This suggests an expectation of increase dividend payments over the next 12 months.
Over the past three years, Source Capital Inc's annual dividend growth rate was 30.50%. Extended to a five-year horizon, this rate decreased to 15.50% per year. Based on Source Capital Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Source Capital Inc stock as of today is approximately 12.11%.
Evaluating Dividend Sustainability: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Source Capital Inc's dividend payout ratio is 0.47.
Source Capital Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Source Capital Inc's profitability 2 out of 10 as of 2023-06-30, suggesting the dividend may not be sustainable. The company has reported net profit in 4 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Source Capital Inc's growth rank of 2 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
Concluding Thoughts
While Source Capital Inc has a consistent dividend payment history and promising yield, its low profitability and growth ranks raise concerns about the sustainability of its dividends. Investors must carefully consider these factors before making investment decisions. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article first appeared on GuruFocus.
