Elanor Investors Group (ASX:ENN) Will Pay A Dividend Of A$0.0475

Elanor Investors Group (ASX:ENN) will pay a dividend of A$0.0475 on the 29th of February. This means the annual payment is 6.5% of the current stock price, which is above the average for the industry.

View our latest analysis for Elanor Investors Group

Elanor Investors Group's Distributions May Be Difficult To Sustain

If the payments aren't sustainable, a high yield for a few years won't matter that much. Despite not generating a profit, Elanor Investors Group is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Over the next year, EPS might fall by 22.1% based on recent performance. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Elanor Investors Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of A$0.104 in 2014 to the most recent total annual payment of A$0.0913. The dividend has shrunk at around 1.4% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Elanor Investors Group's earnings per share has shrunk at 22% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

An additional note is that the company has been raising capital by issuing stock equal to 26% 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.

Elanor Investors Group's Dividend Doesn't Look Great

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the 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. To that end, Elanor Investors Group has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is Elanor Investors Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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