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There's A Lot To Like About Washington H. Soul Pattinson's (ASX:SOL) Upcoming AU$0.35 Dividend

Simply Wall St
·4 min read

Readers hoping to buy Washington H. Soul Pattinson and Company Limited (ASX:SOL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 20th of November in order to be eligible for this dividend, which will be paid on the 14th of December.

Washington H. Soul Pattinson's next dividend payment will be AU$0.35 per share, and in the last 12 months, the company paid a total of AU$0.60 per share. Calculating the last year's worth of payments shows that Washington H. Soul Pattinson has a trailing yield of 2.2% on the current share price of A$27.65. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Washington H. Soul Pattinson has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Washington H. Soul Pattinson

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Washington H. Soul Pattinson is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Washington H. Soul Pattinson generated enough free cash flow to afford its dividend. Dividends consumed 67% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Washington H. Soul Pattinson's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Washington H. Soul Pattinson's earnings have been skyrocketing, up 63% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Washington H. Soul Pattinson has increased its dividend at approximately 5.8% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Should investors buy Washington H. Soul Pattinson for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Washington H. Soul Pattinson paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Washington H. Soul Pattinson, and we would prioritise taking a closer look at it.

In light of that, while Washington H. Soul Pattinson has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for Washington H. Soul Pattinson (of which 1 shouldn't be ignored!) you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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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