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Science Applications International Corporation (NYSE:SAIC) will pay a dividend of $0.37 on the 27th of October. This means the dividend yield will be fairly typical at 1.3%.
View our latest analysis for Science Applications International
Science Applications International's Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Science Applications International's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to fall by 46.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 31%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Science Applications International Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $1.12 total annually to $1.48. This implies that the company grew its distributions at a yearly rate of about 2.8% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Science Applications International has been growing its earnings per share at 16% a year over the past five years. Science Applications International definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Science Applications International's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Science Applications International (of which 1 is significant!) 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.
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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.