Spheria Emerging Companies' (ASX:SEC) Dividend Will Be A$0.036

The board of Spheria Emerging Companies Limited (ASX:SEC) has announced that it will pay a dividend of A$0.036 per share on the 15th of August. This means the dividend yield will be fairly typical at 4.6%.

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Spheria Emerging Companies' Future Dividends May Potentially Be At Risk

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Spheria Emerging Companies was paying out quite a large proportion of both earnings and cash flow, with the dividend being 103% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Looking forward, EPS could fall by 8.9% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 108%, which is definitely a bit high to be sustainable going forward.

Check out our latest analysis for Spheria Emerging Companies

Spheria Emerging Companies' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of A$0.04 in 2018 to the most recent total annual payment of A$0.12. This means that it has been growing its distributions at 17% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Spheria Emerging Companies has seen earnings per share falling at 8.9% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Spheria Emerging Companies' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Spheria Emerging Companies (of which 1 makes us a bit uncomfortable!) 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.