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The board of Dicker Data Limited (ASX:DDR) has announced that it will pay a dividend on the 2nd of December, with investors receiving A$0.11 per share. Based on this payment, the dividend yield on the company's stock will be 5.1%, which is an attractive boost to shareholder returns.
See our latest analysis for Dicker Data
Dicker Data's Projections Indicate Future Payments May Be Unsustainable
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 106% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Earnings per share is forecast to rise by 28.2% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 98%, which is a bit high and could start applying pressure to the balance sheet.
Dicker Data Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was A$0.04 in 2014, and the most recent fiscal year payment was A$0.45. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Dicker Data's Dividend Might Lack Growth
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Dicker Data has been growing its earnings per share at 12% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Dicker Data that investors should know about before committing capital to this stock. Is Dicker Data 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.