Euroz Hartleys Group (ASX:EZL) Is Due To Pay A Dividend Of A$0.03

The board of Euroz Hartleys Group Limited (ASX:EZL) has announced that it will pay a dividend of A$0.03 per share on the 30th of August. The yield is still above the industry average at 5.9%.

View our latest analysis for Euroz Hartleys Group

Euroz Hartleys Group Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Euroz Hartleys Group's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

If the company can't turn things around, EPS could fall by 16.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 126%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from A$0.0794 total annually to A$0.0525. Doing the maths, this is a decline of about 4.1% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 17% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 4 warning signs for Euroz Hartleys Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.