Dynacor Group's (TSE:DNG) Dividend Will Be $0.0133
Dynacor Group Inc. (TSE:DNG) will pay a dividend of $0.0133 on the 20th of January. This means the annual payment is 2.8% of the current stock price, which is above the average for the industry.
Dynacor Group's Future Dividend Projections Appear Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Dynacor Group was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
The next year is set to see EPS grow by 23.5%. 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.
See our latest analysis for Dynacor Group
Dynacor Group's Dividend Has Lacked Consistency
Looking back, Dynacor Group's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 7 years was $0.0301 in 2018, and the most recent fiscal year payment was $0.117. This means that it has been growing its distributions at 21% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
The Dividend Looks Likely To Grow
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. Dynacor Group has seen EPS rising for the last five years, at 30% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
An additional note is that the company has been raising capital by issuing stock equal to 15% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.
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. For example, we've identified 3 warning signs for Dynacor Group (1 can't be ignored!) 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.
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