Neighbourly Pharmacy (TSE:NBLY) Will Pay A Dividend Of CA$0.045

Neighbourly Pharmacy Inc. (TSE:NBLY) has announced that it will pay a dividend of CA$0.045 per share on the 26th of September. This payment means the dividend yield will be 1.1%, which is below the average for the industry.

See our latest analysis for Neighbourly Pharmacy

Neighbourly Pharmacy's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Neighbourly Pharmacy is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 5.3%, which makes us pretty comfortable with the sustainability of the dividend.

Neighbourly Pharmacy Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. There hasn't been much of a change in the dividend over the last 2 years. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Company Could Face Some Challenges Growing The Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Neighbourly Pharmacy has been growing its earnings per share at 66% a year over the past five years. The company hasn't been turning a profit, but it running in the right direction. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

Our Thoughts On Neighbourly Pharmacy's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for Neighbourly Pharmacy for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.