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The board of E-L Financial Corporation Limited (TSE:ELF) has announced that it will pay a dividend of CA$3.75 per share on the 17th of October. Including this payment, the dividend yield on the stock will be 1.1%, which is a modest boost for shareholders' returns.
View our latest analysis for E-L Financial
E-L Financial's Payment Has Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, E-L Financial was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 49.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.
E-L Financial Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$0.50 in 2014 to the most recent total annual payment of CA$15.00. This implies that the company grew its distributions at a yearly rate of about 41% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. E-L Financial has seen EPS rising for the last five years, at 49% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We Really Like E-L Financial'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 easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. See if management have their own wealth at stake, by checking insider shareholdings in E-L Financial stock. Is E-L Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.