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Science Applications International Corporation (NASDAQ:SAIC) will pay a dividend of $0.37 on the 25th of April. This means that the annual payment will be 1.3% of the current stock price, which is in line with the average for the industry.
View our latest analysis for Science Applications International
Science Applications International's Payment Could Potentially Have Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Science Applications International's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 23.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which is in the range that makes us comfortable with the sustainability of the dividend.
Science Applications International Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was $1.12, compared to the most recent full-year payment of $1.48. This works out to be a compound annual growth rate (CAGR) of approximately 2.8% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Science Applications International has impressed us by growing EPS at 14% per 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.
Science Applications International Looks Like A Great Dividend Stock
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. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Science Applications 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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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.