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 20th of September. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Dynacor Group

Dynacor Group's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Dynacor Group was paying only paying out a fraction of earnings, but the payment was a massive 385% of 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 19.9% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

Dynacor Group Doesn't Have A Long Payment History

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 dividend has gone from $0.0301 total annually to $0.0882. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. 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 could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Dynacor Group has grown earnings per share at 20% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Dynacor Group's payments, as there could be some issues with sustaining them into the future. While Dynacor Group is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Dynacor Group has 3 warning signs (and 1 which is potentially serious) we think you should know about. 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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