Yahoo Finance Shaver Shop Group's (ASX:SSG) Dividend Will Be A$0.047
Shaver Shop Group Limited (ASX:SSG) will pay a dividend of A$0.047 on the 21st of March. Based on this payment, the dividend yield on the company's stock will be 8.4%, which is an attractive boost to shareholder returns.
View our latest analysis for Shaver Shop Group
Shaver Shop Group Doesn't Earn Enough To Cover Its Payments
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Shaver Shop Group's dividend made up quite a large proportion of earnings but only 52% of free cash flows. This leaves plenty of cash for reinvestment into the business.
Over the next year, EPS is forecast to expand by 8.6%. If the dividend continues on its recent course, the payout ratio in 12 months could be 96%, which is a bit high and could start applying pressure to the balance sheet.
Shaver Shop Group's Dividend Has Lacked Consistency
It's comforting to see that Shaver Shop Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of A$0.032 in 2017 to the most recent total annual payment of A$0.102. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
Shaver Shop Group's Dividend Might Lack Growth
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Shaver Shop Group has grown earnings per share at 20% per year over the past five years. However, Shaver Shop Group isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Shaver Shop Group's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Shaver Shop Group that investors should take into consideration. 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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