SKYCITY ENTERTAINMENT GROUP LIMITED. (NZSE:SKC) has announced that it will pay a dividend of NZ$0.0618 per share on March 21st. This means the annual payout is 5.6% of the current stock price, which is above the industry average.
Check out our latest analysis for SkyCity Entertainment Group.
SkyCity Entertainment Group's payments cover guaranteed revenue
The dividend yield is good, but it doesn't really matter if you can't keep up the payments. Prior to this announcement, dividends accounted for 1,104% of profits and the company was generating negative free cash flow. Paying out such a large dividend relative to its profit while generating no free cash flow would definitely be difficult to sustain.
According to analysts, next year's EPS should increase several times. If the dividend continues in line with recent trends, the company's payout ratio is expected to be 60%, making it satisfactory for the sustainability of the dividend, despite the current increase in levels.
Dividend volatility
The company has a long history of dividends, but the company has cut dividends in the past and its business performance is not good. Over the past 10 years, his annual payments were NZ$0.20 in 2014 and his most recent financial year payments were NZ$0.105. Doing the math, this works out to be a decline of about 6.2% per year. Generally, it is undesirable to see dividends decreasing over time, as it can reduce shareholder returns and indicate that the company may be in trouble.
Potential for dividend growth is unstable
With dividends trending in the wrong direction, we would definitely like to see a different trend in earnings per share. SkyCity Entertainment Group's earnings per share have decreased by 46% per year over the past five years. Dividend payments are likely to come under some pressure unless EPS can break out of its current precipitous decline. On the bright side, we expect some revenue growth over the next year, but we won't see profits until this patterns. Feeling too comfortable.
Skycity Entertainment Group's dividend doesn't look very good.
In summary, while it's good that the dividend hasn't been cut, we don't think the payout is particularly sustainable at current levels. The company seems to be stretching itself a bit to make such large payments, but I doubt it will be able to maintain consistency over the long term. Overall, the dividend isn't reliable enough to make this a good income stock.
Market movements prove how highly valued a consistent dividend policy is compared to a more unpredictable dividend policy. On the other hand, despite the importance of dividends, they are not the only factor that our readers need to know when evaluating a company. As just one example, we found that 3 warning signs for SkyCity Entertainment Group You should know, one of them is a little worrying. Is SkyCity Entertainment Group the opportunity you've been looking for? Why not check it out? Selection of high 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 using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.