Excelsior Capital (ASX:ECL) Is Due To Pay A Dividend Of A$0.04

The board of Excelsior Capital Limited (ASX:ECL) has announced that it will pay a dividend of A$0.04 per share on the 20th of March. This takes the dividend yield to 2.2%, which shareholders will be pleased with.

View our latest analysis for Excelsior Capital

Excelsior Capital's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Excelsior Capital is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 63.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 5.3% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was A$0.06, compared to the most recent full-year payment of A$0.07. This works out to be a compound annual growth rate (CAGR) of approximately 1.6% a year over that time. 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 Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Excelsior Capital has seen EPS rising for the last five years, at 64% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Excelsior Capital's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Excelsior Capital is a great stock to add to your portfolio if income is your focus.

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. To that end, Excelsior Capital has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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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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.