ADF Group (TSE:DRX) Will Pay A Dividend Of CA$0.01

By
Simply Wall St
Published
April 15, 2022
TSX:DRX
Source: Shutterstock

The board of ADF Group Inc. (TSE:DRX) has announced that it will pay a dividend on the 17th of May, with investors receiving CA$0.01 per share. This payment means that the dividend yield will be 1.2%, which is around the industry average.

See our latest analysis for ADF Group

ADF Group's Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, ADF Group's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 44.9% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 4.7%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
TSX:DRX Historic Dividend April 15th 2022

ADF Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The payments haven't really changed that much since 10 years ago. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see ADF Group has been growing its earnings per share at 45% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for ADF Group you should be aware of, and 1 of them doesn't sit too well with us. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.