Stock Analysis

Decisive Dividend (CVE:DE) Has Announced A Dividend Of CA$0.035

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Decisive Dividend Corporation's (CVE:DE) investors are due to receive a payment of CA$0.035 per share on 15th of May. The dividend yield will be 7.2% based on this payment which is still above the industry average.

Check out our latest analysis for Decisive Dividend

Decisive Dividend Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share is forecast to rise by 29.4% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 113% over the next year.

TSXV:DE Historic Dividend April 18th 2023

Decisive Dividend's Dividend Has Lacked Consistency

Looking back, Decisive Dividend's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of CA$0.24 in 2015 to the most recent total annual payment of CA$0.42. This means that it has been growing its distributions at 7.2% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Decisive Dividend's Dividend Might Lack Growth

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Decisive Dividend has grown earnings per share at 22% per year over the past five years. Although earnings per share is up nicely Decisive Dividend is paying out 109% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

An additional note is that the company has been raising capital by issuing stock equal to 42% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Decisive Dividend's payments, as there could be some issues with sustaining them into the future. Strong earnings growth means Decisive Dividend has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. 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. For example, we've identified 4 warning signs for Decisive Dividend (1 shouldn't be ignored!) that you should be aware of before investing. Is Decisive Dividend not quite the opportunity you were looking for? Why not check out our selection of top 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.