Yahoo Finance Decisive Dividend (CVE:DE) Will Pay A Dividend Of CA$0.045
Decisive Dividend Corporation (CVE:DE) will pay a dividend of CA$0.045 on the 15th of May. Based on this payment, the dividend yield on the company's stock will be 5.8%, which is an attractive boost to shareholder returns.
Check out our latest analysis for Decisive Dividend
Decisive Dividend's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Decisive Dividend's was paying out quite a large proportion of earnings and 88% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.
Over the next year, EPS is forecast to expand by 25.2%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 93% which is a bit high but can definitely be sustainable.
Decisive Dividend's Dividend Has Lacked Consistency
Looking back, Decisive Dividend's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the dividend has gone from CA$0.24 total annually to CA$0.54. This implies that the company grew its distributions at a yearly rate of about 9.4% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
Decisive Dividend Might Find It Hard To Grow Its Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Decisive Dividend has grown earnings per share at 46% per year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Decisive Dividend is not retaining those earnings to reinvest in growth.
An additional note is that the company has been raising capital by issuing stock equal to 12% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
Our Thoughts On Decisive Dividend's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Decisive Dividend's payments, as there could be some issues with sustaining them into the future. Strong earnings growth means Decisive Dividend has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. Overall, we don't think this company has the makings of a good 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 4 warning signs for Decisive Dividend that investors need to be conscious of moving forward. 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.
