Decisive Dividend (CVE:DE) Is Paying Out A Dividend Of CA$0.045

Decisive Dividend Corporation (CVE:DE) will pay a dividend of CA$0.045 on the 15th of July. This makes the dividend yield 7.2%, which will augment investor returns quite nicely.

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Decisive Dividend's Projections Indicate Future Payments May Be Unsustainable

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the dividend made up 95% of cash flows, but a higher proportion of net income. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

Earnings per share is forecast to rise by 47.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Check out our latest analysis for Decisive Dividend

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was CA$0.24, compared to the most recent full-year payment of CA$0.54. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Decisive Dividend might have put its house in order since then, but we remain cautious.

Dividend Growth Could Be Constrained

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Decisive Dividend has grown earnings per share at 30% per year over the past five years. While EPS is growing rapidly, Decisive Dividend paid out a very high 375% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

Decisive Dividend's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 5 warning signs (and 2 which are potentially serious) we think you should know about. 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.