Neo Performance Materials (TSE:NEO) Has Affirmed Its Dividend Of $0.10

The board of Neo Performance Materials Inc. (TSE:NEO) has announced that it will pay a dividend of $0.10 per share on the 27th of June. Based on this payment, the dividend yield will be 3.6%, which is fairly typical for the industry.

Our free stock report includes 1 warning sign investors should be aware of before investing in Neo Performance Materials. Read for free now.

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

We aren't too impressed by dividend yields unless they can be sustained over time. Even in the absence of profits, Neo Performance Materials is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

The next 12 months is set to see EPS grow by 118.5%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Check out 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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 7 years was $0.284 in 2018, and the most recent fiscal year payment was $0.275. Payments have been decreasing at a very slow pace in this time period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid 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 don't think Neo Performance Materials is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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. 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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