Sonic Automotive (NYSE:SAH) Will Pay A Larger Dividend Than Last Year At US$0.25

·2-min read

Sonic Automotive, Inc.'s (NYSE:SAH) dividend will be increasing to US$0.25 on 15th of July. This takes the annual payment to 1.6% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Sonic Automotive

Sonic Automotive's Dividend Is 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. Before making this announcement, Sonic Automotive 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.

Looking forward, earnings per share is forecast to rise by 8.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.3% by next year, which is in a pretty sustainable range.

historic-dividend
historic-dividend

Sonic Automotive Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was US$0.10 in 2012, and the most recent fiscal year payment was US$1.00. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Sonic Automotive has impressed us by growing EPS at 41% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Sonic Automotive Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Sonic Automotive that investors should take into consideration. Is Sonic Automotive not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting