Yahoo Finance Dynacor Group (TSE:DNG) Has Affirmed Its Dividend Of $0.0117
Dynacor Group Inc. (TSE:DNG) will pay a dividend of $0.0117 on the 18th of April. Based on this payment, the dividend yield on the company's stock will be 3.0%, which is an attractive boost to shareholder returns.
See our latest analysis for Dynacor Group
Dynacor Group's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Dynacor Group's dividend was only 23% of earnings, however it was paying out 107% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
If the trend of the last few years continues, EPS will grow by 27.7% over the next 12 months. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.
Dynacor Group Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 6 years was $0.0301 in 2018, and the most recent fiscal year payment was $0.103. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. Dynacor Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Dynacor Group has impressed us by growing EPS at 28% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Dynacor Group is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Dynacor Group 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.
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.
