The board of Propel Holdings Inc. (TSE:PRL) has announced that it will be paying its dividend of $0.10 on the 7th of June, an increased payment from last year's comparable dividend. This makes the dividend yield 5.0%, which is above the industry average.
Check out our latest analysis for Propel Holdings
Propel Holdings' Earnings Easily Cover The Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Propel Holdings' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Looking forward, earnings per share is forecast to rise by 56.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.
Propel Holdings Doesn't Have A Long Payment History
It's not possible for us to make a backward looking judgement just based on a short payment history. 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.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Propel Holdings has been growing its earnings per share at 29% a year over the past five years. Propel Holdings is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Propel Holdings is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Propel Holdings (2 are a bit concerning!) that you should be aware of before investing. 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.
