Yahoo Finance SEEK (ASX:SEK) Will Pay A Larger Dividend Than Last Year At A$0.24
SEEK Limited's (ASX:SEK) dividend will be increasing from last year's payment of the same period to A$0.24 on 5th of April. This will take the dividend yield to an attractive 1.7%, providing a nice boost to shareholder returns.
Check out our latest analysis for SEEK
SEEK's Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by SEEK's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
The next year is set to see EPS grow by 37.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was A$0.18 in 2013, and the most recent fiscal year payment was A$0.42. This works out to be a compound annual growth rate (CAGR) of approximately 8.8% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
Dividend Growth May Be Hard To Come By
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. In the last five years, SEEK's earnings per share has shrunk at approximately 7.4% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
Our Thoughts On SEEK's Dividend
In summary, while it's always good to see the dividend being raised, we don't think SEEK's payments are rock solid. 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 15 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is SEEK 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.
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