SSC Security Services (CVE:SECU) Has Affirmed Its Dividend Of CA$0.03

SSC Security Services Corp. (CVE:SECU) has announced that it will pay a dividend of CA$0.03 per share on the 15th of July. Based on this payment, the dividend yield on the company's stock will be 4.1%, which is an attractive boost to shareholder returns.

See our latest analysis for SSC Security Services

SSC Security Services Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, SSC Security Services was paying out 5,111% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Earnings per share could rise by 38.2% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 6,351%, which is a bit high and could start applying pressure to the balance sheet.

SSC Security Services Is Still Building Its Track Record

It is great to see that SSC Security Services has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. There hasn't been much of a change in the dividend over the last 6 years. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. SSC Security Services has impressed us by growing EPS at 38% per year over the past five years. While EPS is growing rapidly, SSC Security Services paid out a very high 5,111% 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.

SSC Security Services' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about SSC Security Services' payments, as there could be some issues with sustaining them into the future. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We don't think SSC Security Services is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for SSC Security Services (of which 1 is a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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