SKY Network Television Limited (NZSE:SKT) will increase its dividend on the 20th of September to NZ$0.1412, which is 33% higher than last year's payment from the same period of NZ$0.106. This will take the annual payment to 6.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for SKY Network Television

SKY Network Television's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, SKY Network Television was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 10.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was NZ$2.80, compared to the most recent full-year payment of NZ$0.19. This works out to a decline of approximately 93% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. SKY Network Television has seen EPS rising for the last five years, at 90% per annum. SKY Network Television is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

SKY Network Television Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that SKY Network Television is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for SKY Network Television (1 is a bit concerning!) that you should be aware of before investing. 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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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.