Duke Capital (LON:DUKE) Will Pay A Dividend Of £0.007
Duke Capital Limited's (LON:DUKE) investors are due to receive a payment of £0.007 per share on 14th of January. This makes the dividend yield 9.6%, which will augment investor returns quite nicely.
Duke Capital's Projections Indicate Future Payments May Be Unsustainable
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Duke Capital was paying out 285% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.
Earnings per share is forecast to rise by 50.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.
Check out our latest analysis for Duke Capital
Duke Capital's Dividend Has Lacked Consistency
Duke Capital has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 8 years was £0.0196 in 2017, and the most recent fiscal year payment was £0.028. This implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 14% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
We're Not Big Fans Of Duke Capital's Dividend
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Duke Capital make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income 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 1 warning sign for Duke Capital that you should be aware of before investing. Is Duke Capital not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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