Cadence Opportunities Fund (ASX:CDO) Is Paying Out A Dividend Of A$0.065

The board of Cadence Opportunities Fund Limited (ASX:CDO) has announced that it will pay a dividend on the 31st of October, with investors receiving A$0.065 per share. This makes the dividend yield 8.6%, which will augment investor returns quite nicely.

View our latest analysis for Cadence Opportunities Fund

Cadence Opportunities Fund's Distributions May Be Difficult To Sustain

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Despite not generating a profit, Cadence Opportunities Fund 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.

Recent, EPS has fallen by 95.7%, so this could continue over the next year. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

Cadence Opportunities Fund Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The last annual payment of A$0.15 was flat on the annual payment from2 years ago. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 96% over the last three years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

We're Not Big Fans Of Cadence Opportunities Fund's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Cadence Opportunities Fund 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. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Cadence Opportunities Fund has 4 warning signs (and 2 which shouldn't be ignored) we think you should know about. Is Cadence Opportunities Fund not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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