Dynacor Group (TSE:DNG) Has Announced A Dividend Of $0.01

Dynacor Group Inc.'s (TSE:DNG) investors are due to receive a payment of $0.01 per share on 17th of May. This means the annual payment is 4.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Dynacor Group

Dynacor Group's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Dynacor Group's dividend was only 24% of earnings, however it was paying out 144% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 25.8% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dynacor Group Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the annual payment back then was $0.0301, compared to the most recent full-year payment of $0.0881. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. Dynacor Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Dynacor Group has been growing its earnings per share at 26% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Dynacor Group's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Dynacor Group that investors should know about before committing capital to this stock. Is Dynacor Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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