The board of Scorpio Tankers Inc. (NYSE:STNG) has announced that it will pay a dividend on the 29th of August, with investors receiving $0.40 per share. This means the annual payment will be 3.4% of the current stock price, which is lower than the industry average.
Scorpio Tankers' Future Dividend Projections Appear Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Scorpio Tankers' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to fall by 4.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 17%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
See our latest analysis for Scorpio Tankers
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 $4.80 in 2015, and the most recent fiscal year payment was $1.60. The dividend has fallen 67% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Scorpio Tankers has been growing its earnings per share at 21% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Scorpio Tankers Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Scorpio Tankers might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. Case in point: We've spotted 3 warning signs for Scorpio Tankers (of which 1 shouldn't be ignored!) you should know about. Is Scorpio Tankers 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.