Suncorp Group (ASX:SUN) Will Pay A Dividend Of A$0.49
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Suncorp Group's Future Dividends May Potentially Be At Risk
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Suncorp Group's earnings. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to fall by 13.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach over 200%, which could put the dividend in jeopardy if the company's earnings don't improve.
Check out our latest analysis for Suncorp Group
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of A$1.31 in 2015 to the most recent total annual payment of A$0.90. This works out to be a decline of approximately 3.7% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Suncorp Group has grown earnings per share at 20% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
We Really Like Suncorp Group's Dividend
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Suncorp Group has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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