Yahoo Finance Decisive Dividend's (CVE:DE) Dividend Will Be CA$0.045
Decisive Dividend Corporation (CVE:DE) has announced that it will pay a dividend of CA$0.045 per share on the 15th of July. This means the annual payment is 7.4% of the current stock price, which is above the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Decisive Dividend's stock price has reduced by 34% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
Check out our latest analysis for Decisive Dividend
Decisive Dividend Doesn't Earn Enough To Cover Its Payments
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 132% of what it was earning and 90% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.
Over the next year, EPS is forecast to expand by 32.4%. If the dividend continues on its recent course, the payout ratio in 12 months could be 118%, which is a bit high and could start applying pressure to the balance sheet.
Decisive Dividend's Dividend Has Lacked Consistency
It's comforting to see that Decisive Dividend has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of CA$0.24 in 2015 to the most recent total annual payment of CA$0.54. This means that it has been growing its distributions at 9.4% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Decisive Dividend might have put its house in order since then, but we remain cautious.
Decisive Dividend's Dividend Might Lack Growth
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Decisive Dividend has grown earnings per share at 148% per year over the past five years. Although earnings per share is up nicely Decisive Dividend is paying out 132% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.
We should note that Decisive Dividend has issued stock equal to 12% of shares outstanding. 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.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Decisive Dividend (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Decisive Dividend not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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