The board of Findev Inc. (CVE:FDI) has announced that it will pay a dividend of CA$0.0075 per share on the 15th of October. The dividend yield will be 5.7% based on this payment which is still above the industry average.
Findev's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment was quite easily covered by earnings, but it made up 130% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
Over the next year, EPS could expand by 94.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.
Findev Is Still Building Its Track Record
Findev's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. There hasn't been much of a change in the dividend over the last 5. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Findev has seen EPS rising for the last five years, at 95% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
Our Thoughts On Findev's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Findev that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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