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Dynacor Group Inc.'s (TSE:DNG) dividend will be increasing from last year's payment of the same period to $0.0133 on 17th of January. Based on this payment, the dividend yield for the company will be 2.4%, which is fairly typical for the industry.
Check out our latest analysis for Dynacor Group
Dynacor Group's Payment Could Potentially Have Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Dynacor Group's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS could expand by 29.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dynacor Group's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2018, the dividend has gone from $0.0301 total annually to $0.097. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Looks Likely To Grow
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. Dynacor Group has seen EPS rising for the last five years, at 30% per annum. 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.
We Really Like Dynacor Group's Dividend
Overall, a dividend increase is always good, and we think that Dynacor Group is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
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 1 warning sign 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.
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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.