Dyno Nobel (ASX:DNL) Is Paying Out Less In Dividends Than Last Year

The board of Dyno Nobel Limited (ASX:DNL) has announced that the dividend on 3rd of July will be reduced by 44% from last year's A$0.043 to A$0.024. The dividend yield will be in the average range for the industry at 4.0%.

We've discovered 1 warning sign about Dyno Nobel. View them for free.

Dyno Nobel's Long-term Dividend Outlook appears Promising

Unless the payments are sustainable, the dividend yield doesn't mean too much. Despite not being profitable, Dyno Nobel is paying out most of its free cash flow as a dividend. Paying a dividend while unprofitable is generally considered an aggressive policy, and with limited funds retained for reinvestment, growth may be slow.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 37%, which we would be comfortable to see continuing.

See our latest analysis for Dyno Nobel

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$0.108, compared to the most recent full-year payment of A$0.106. Payments have been decreasing at a very slow pace in this time period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Dyno Nobel's earnings per share has shrunk at 31% 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

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 track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Dyno Nobel 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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