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SSC Security Services Corp.'s (CVE:SECU) investors are due to receive a payment of CA$0.03 per share on 15th of January. Based on this payment, the dividend yield on the company's stock will be 4.4%, which is an attractive boost to shareholder returns.
View our latest analysis for SSC Security Services
SSC Security Services' Projections Indicate Future Payments May Be Unsustainable
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 382% 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 could rise by 21.1% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 311%, which is a bit high and could start applying pressure to the balance sheet.
SSC Security Services Is Still Building Its Track Record
SSC Security Services' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. There hasn't been much of a change in the dividend over the last 8 years. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.
SSC Security Services' Dividend Might Lack Growth
The company's investors will be pleased to have been receiving dividend income for some time. SSC Security Services has seen EPS rising for the last five years, at 21% per annum. EPS has been growing well, but SSC Security Services has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.
SSC Security Services' Dividend Doesn't Look Sustainable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about SSC Security Services' payments, as there could be some issues with sustaining them into the future. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for SSC Security Services (1 is a bit concerning!) that you should be aware of before investing. Is SSC Security Services 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.