Yahoo Finance Tsogo Sun (JSE:TSG) Will Pay A Dividend Of ZAR0.40
The board of Tsogo Sun Limited (JSE:TSG) has announced that it will pay a dividend on the 29th of July, with investors receiving ZAR0.40 per share. This means that the annual payment will be 6.1% of the current stock price, which is in line with the average for the industry.
View our latest analysis for Tsogo Sun
Tsogo Sun's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Tsogo Sun's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
EPS is set to fall by 0.8% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 46%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ZAR0.80 in 2014 to the most recent total annual payment of ZAR0.70. This works out to be a decline of approximately 1.3% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend's Growth Prospects Are Limited
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Tsogo Sun's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Our Thoughts On Tsogo Sun's Dividend
In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Tsogo Sun that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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