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The board of Decisive Dividend Corporation (CVE:DE) has announced that it will pay a dividend of CA$0.045 per share on the 13th of September. This makes the dividend yield 8.8%, which will augment investor returns quite nicely.
Check out our latest analysis for Decisive Dividend
Decisive Dividend Is Paying Out More Than It Is Earning
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 217% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Earnings per share is forecast to rise by 47.6% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 164% over the next year.
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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 years was CA$0.24 in 2015, and the most recent fiscal year payment was CA$0.54. This implies that the company grew its distributions at a yearly rate of about 9.4% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
Decisive Dividend's Dividend Might Lack Growth
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Decisive Dividend has impressed us by growing EPS at 33% per year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.
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. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 5 warning signs for Decisive Dividend (2 are significant!) 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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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.