Stock Analysis

Decisive Dividend (CVE:DE) Is Due To Pay A Dividend Of CA$0.03

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Decisive Dividend Corporation (CVE:DE) will pay a dividend of CA$0.03 on the 15th of September. Based on this payment, the dividend yield on the company's stock will be 8.4%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Decisive Dividend

Decisive Dividend Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

EPS is set to grow by 7.8% over the next year if recent trends continue. If the dividend continues on its recent course, the payout ratio in 12 months could be 130%, which is a bit high and could start applying pressure to the balance sheet.

TSXV:DE Historic Dividend August 23rd 2022

Decisive Dividend's Dividend Has Lacked Consistency

It's comforting to see that Decisive Dividend has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 7 years was CA$0.24 in 2015, and the most recent fiscal year payment was CA$0.36. This implies that the company grew its distributions at a yearly rate of about 6.0% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Decisive Dividend May Have Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Decisive Dividend has grown earnings per share at 7.8% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Decisive Dividend has 4 warning signs (and 2 which don't sit too well with us) we think 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.