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Decisive Dividend Corporation (CVE:DE) has announced that it will pay a dividend of CA$0.045 per share on the 14th of February. This makes the dividend yield 8.9%, which will augment investor returns quite nicely.
Check out our latest analysis for Decisive Dividend
Decisive Dividend's Projections Indicate Future Payments May Be Unsustainable
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Over the next year, EPS is forecast to expand by 71.6%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was CA$0.24, compared to the most recent full-year payment of CA$0.54. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. 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's Dividend Might Lack Growth
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Decisive Dividend has been growing its earnings per share at 53% a year over the past five years. Although earnings per share is up nicely Decisive Dividend is paying out 389% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.
Decisive Dividend's Dividend Doesn't Look Sustainable
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. We don't think Decisive Dividend is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 5 warning signs for Decisive Dividend you should be aware of, and 2 of them are potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.