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Somnigroup International Inc. (NYSE:SGI) will pay a dividend of $0.15 on the 5th of June. Even though the dividend went up, the yield is still quite low at only 0.9%.
Somnigroup International's Projected Earnings Seem Likely To Cover Future Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Somnigroup International was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 163.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.
View our latest analysis for Somnigroup International
Somnigroup International Doesn't Have A Long Payment History
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 4 years was $0.28 in 2021, and the most recent fiscal year payment was $0.60. This means that it has been growing its distributions at 21% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
Somnigroup International Could Grow Its Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Somnigroup International has grown earnings per share at 5.1% per year over the past five years. Somnigroup International definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We should note that Somnigroup International has issued stock equal to 20% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.