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Scorpio Tankers Inc. (NYSE:STNG) will increase its dividend from last year's comparable payment on the 15th of December to $0.35. Even though the dividend went up, the yield is still quite low at only 2.4%.
View our latest analysis for Scorpio Tankers
Scorpio Tankers' Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Scorpio Tankers' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to fall by 31.0%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 8.5%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from $1.00 total annually to $1.40. This implies that the company grew its distributions at a yearly rate of about 3.4% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Scorpio Tankers has seen EPS rising for the last five years, at 63% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Scorpio Tankers Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Scorpio Tankers is a strong income stock thanks to its track record and growing earnings. 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 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Scorpio Tankers you should be aware of, and 1 of them is concerning. Is Scorpio Tankers 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.