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Stingray Group Inc. (TSE:RAY.A) will pay a dividend of CA$0.075 on the 15th of September. This means the annual payment is 5.1% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Stingray Group
Stingray Group's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Stingray Group's earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 49.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.
Stingray Group Doesn't Have A Long Payment History
It is great to see that Stingray Group 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 CA$0.12 in 2015, and the most recent fiscal year payment was CA$0.30. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Stingray Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Stingray Group has impressed us by growing EPS at 26% per year over the past five years. Stingray Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
We Really Like Stingray Group's Dividend
Overall, we like to see the dividend staying consistent, and we think Stingray Group might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Stingray Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.