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ECN Capital Corp. (TSE:ECN) has announced that it will pay a dividend of $0.01 per share on the 30th of June. This means the annual payment will be 1.3% of the current stock price, which is lower than the industry average.
View our latest analysis for ECN Capital
ECN Capital Doesn't Earn Enough To Cover Its Payments
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even though ECN Capital is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.
The next 12 months is set to see EPS grow by 159.4%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 111% over the next year.
ECN Capital Is Still Building Its Track Record
It is great to see that ECN Capital has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 7 years was $0.0295 in 2016, and the most recent fiscal year payment was $0.0289. The dividend has shrunk at a rate of less than 1% a year over this period. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately, ECN Capital's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. ECN Capital isn't actually turning a profit, which makes it much harder for us to see how they can grow dividends.
ECN Capital's Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.
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. As an example, we've identified 1 warning sign for ECN Capital that you should be aware of before investing. Is ECN Capital not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.