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Findev Inc. (CVE:FDI) will pay a dividend of CA$0.0075 on the 16th of October. This means the annual payment is 7.4% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Findev
Findev's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Findev's dividend was only 43% of earnings, however it was paying out 104% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Over the next year, EPS could expand by 4.6% if recent trends continue. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.
Findev Is Still Building Its Track Record
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The most recent annual payment of CA$0.03 is about the same as the annual payment 8 years ago. Findev hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 4.6% per annum over the last five years, which admittedly is a bit slow. Findev is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
Our Thoughts On Findev's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Findev's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Findev is a great stock to add to your portfolio if income is your focus.
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. Case in point: We've spotted 3 warning signs for Findev (of which 1 makes us a bit uncomfortable!) you should know about. Is Findev not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.