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Olympia Financial Group Inc. (TSE:OLY) has announced that it will pay a dividend of CA$0.23 per share on the 30th of June. The dividend yield will be 5.4% based on this payment which is still above the industry average.
View our latest analysis for Olympia Financial Group
Olympia Financial Group's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Olympia Financial Group was paying out 91% of earnings, but a comparatively small 52% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Earnings per share could rise by 10.3% over the next year if things go the same way as they have for the last few years. If recent patterns in the dividend continue, the payout ratio in 12 months could be 83% which is a bit high but can definitely be sustainable.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2011, the dividend has gone from CA$2.00 to CA$2.76. This works out to be a compound annual growth rate (CAGR) of approximately 3.3% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
Olympia Financial Group's Dividend Might Lack Growth
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. It's encouraging to see Olympia Financial Group has been growing its earnings per share at 10% 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.
Our Thoughts On Olympia Financial Group's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Olympia Financial Group's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Olympia Financial Group that investors should take into consideration. We have also put together a list of global stocks with a solid 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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