The board of Propel Holdings Inc. (TSE:PRL) has announced that it will pay a dividend of $0.095 per share on the 7th of March. This makes the dividend yield 4.8%, which will augment investor returns quite nicely.
See our latest analysis for Propel Holdings
Propel Holdings Doesn't Earn Enough To Cover Its Payments
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Propel Holdings was paying out 123% 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.
The next 12 months is set to see EPS grow by 69.4%. If the dividend continues on its recent course, the payout ratio in 12 months could be 95%, which is a bit high and could start applying pressure to the balance sheet.
Propel Holdings Doesn't Have A Long Payment History
The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
Propel Holdings' Dividend Might Lack Growth
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Propel Holdings has been growing its earnings per share at 21% a year over the past five years. EPS has been growing well, but Propel Holdings has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.
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. 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 Propel Holdings is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Propel Holdings has 5 warning signs (and 3 which are significant) 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.
About TSX:PRL
Exceptional growth potential with proven track record.
