01-04-2025
Sun International's (JSE:SUI) Shareholders Will Receive A Bigger Dividend Than Last Year
Sun International Limited (JSE:SUI) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of April to ZAR2.37. This takes the dividend yield to 9.6%, which shareholders will be pleased with.
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment made up 80% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
If the trend of the last few years continues, EPS will grow by 9.4% over the next 12 months. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 75% which brings it into quite a comfortable range.
Check out our latest analysis for Sun International
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ZAR2.08 total annually to ZAR3.98. This means that it has been growing its distributions at 6.7% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Sun International has been growing its earnings per share at 9.4% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.
Overall, we always like to see the dividend being raised, but we don't think Sun International will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Sun International that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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