In This Article:
SHAPE Australia Corporation Limited (ASX:SHA) will increase its dividend from last year's comparable payment on the 10th of September to A$0.09. This will take the dividend yield to an attractive 6.0%, providing a nice boost to shareholder returns.
Check out our latest analysis for SHAPE Australia
SHAPE Australia's Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, SHAPE Australia's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to grow by 14.3% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 84% - on the higher side, but we wouldn't necessarily say this is unsustainable.
SHAPE Australia's Dividend Has Lacked Consistency
Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2022, the annual payment back then was A$0.08, compared to the most recent full-year payment of A$0.16. This means that it has been growing its distributions at 41% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Has Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. SHAPE Australia has impressed us by growing EPS at 8.4% per year over the past three years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
In Summary
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for SHAPE Australia that investors should know about before committing capital to this stock. Is SHAPE Australia not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.