Schaffer (ASX:SFC) to Pay Dividend of A$0.45: A Sweet Deal for Income Investors

As an income investor, you're always on the lookout for reliable, high-yielding investments. Schaffer Corporation Ltd (ASX:SFC) has just announced that it will pay a dividend of A$0.45, which is great news for those seeking steady income from their investments. Let's dive into the details and explore why this dividend is a sweet deal for income investors.

A Generous Yield Schaffer's dividend yield of 4.15% is quite attractive compared to the average yield of around 2.5% to 3% for other dividend-paying stocks in the Consumer Cyclical sector. This high yield means that for every A$100 you invest in Schaffer, you'll receive A$4.15 in dividends annually. That's a significant return on your investment, especially when considering the current low-interest-rate environment.

Consistent Dividend Growth Schaffer has a history of consistent dividend growth. From 2015 to 2021, the company increased its dividend per share from $0.45 to $0.90, representing a 100% increase. This growth rate has been steady, with an average annual growth rate of approximately 10% over this period. Looking ahead, Schaffer has a projected dividend growth rate of 13.9% for the next year, which is in line with its historical growth rate. This suggests that Schaffer's dividend growth is expected to continue at a steady pace in the near future.

A Well-covered Dividend The dividend payout ratio for Schaffer is 40%, which indicates that the company is paying out 40% of its earnings as dividends. This ratio is lower than the average for its industry peers, suggesting that Schaffer is distributing a smaller proportion of its earnings as dividends compared to its competitors. However, the company's consistent dividend growth and high yield indicate that the dividend is well-covered by earnings.

Insider Confidence Schaffer's directors have been actively buying the company's shares, indicating their confidence in the company's prospects. In the past year, David Schwartz, a non-executive independent director, has purchased over A$300,000 worth of Schaffer shares, while John Schaffer, the chairman and managing director, has bought over A$200,000 worth of shares. This insider buying activity suggests that Schaffer's directors believe the company's shares are undervalued and that the dividend is sustainable.

A Solid Investment Case Schaffer's high dividend yield, consistent dividend growth, well-covered dividend, and insider confidence make a strong case for investing in the company for income. Additionally, Schaffer's diversified business model, with core operating divisions in Manufacturing (Automotive Leather and Building Materials) and Investments, provides a solid foundation for its dividend payments.

In conclusion, Schaffer's upcoming dividend of A$0.45 is a sweet deal for income investors. With its high yield, consistent dividend growth, well-covered dividend, and insider confidence, Schaffer offers a compelling investment case for those seeking steady income from their investments. As an income investor, you should consider adding Schaffer to your portfolio to take advantage of this attractive dividend opportunity.