Neo Performance Materials' (TSE:NEO) Dividend Will Be $0.10

The board of Neo Performance Materials Inc. (TSE:NEO) has announced that it will pay a dividend on the 27th of June, with investors receiving $0.10 per share. This payment means that the dividend yield will be 4.2%, which is around the industry average.

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Neo Performance Materials' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Neo Performance Materials' Could Struggle to Maintain Dividend Payments In The Future

Neo Performance Materials' Future Dividends May Potentially Be At Risk

Unless the payments are sustainable, the dividend yield doesn't mean too much. Even though Neo Performance Materials is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

The next 12 months is set to see EPS grow by 118.1%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

View our latest analysis for Neo Performance Materials

Neo Performance Materials' Dividend Has Lacked Consistency

Looking back, Neo Performance Materials' dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the annual payment back then was $0.284, compared to the most recent full-year payment of $0.286. Dividend payments have been growing, but very slowly over the period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Neo Performance Materials has impressed us by growing EPS at 13% per year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Neo Performance Materials' payments, as there could be some issues with sustaining them into the future. Strong earnings growth means Neo Performance Materials has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Neo Performance Materials that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.