Domain Holdings Australia's (ASX:DHG) Dividend Will Be A$0.04

The board of Domain Holdings Australia Limited (ASX:DHG) has announced that it will pay a dividend on the 11th of September, with investors receiving A$0.04 per share. The dividend yield will be 2.2% based on this payment which is still above the industry average.

See our latest analysis for Domain Holdings Australia

Domain Holdings Australia's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 87% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 72.0%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 52% which brings it into quite a comfortable range.

Domain Holdings Australia's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of A$0.08 in 2017 to the most recent total annual payment of A$0.06. Doing the maths, this is a decline of about 4.0% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Domain Holdings Australia Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Domain Holdings Australia has been growing its earnings per share at 53% a year over the past five years. However, Domain Holdings Australia isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 14 Domain Holdings Australia analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.