Stingray Group (TSE:RAY.A) Is Paying Out A Dividend Of CA$0.075

Stingray Group Inc.'s (TSE:RAY.A) investors are due to receive a payment of CA$0.075 per share on 13th of September. Based on this payment, the dividend yield will be 3.8%, which is fairly typical for the industry.

Check out our latest analysis for Stingray Group

Stingray Group Might Find It Hard To Continue The Dividend

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. While Stingray Group is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS could expand by 3.7% if recent trends continue. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

Stingray Group Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 9 years was CA$0.12 in 2015, and the most recent fiscal year payment was CA$0.30. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 3.7% per annum over the last five years, which admittedly is a bit slow. Earnings growth isn't particularly strong, and if the company isn't able to become profitable fairly soon, the dividend could come under pressure.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Stingray Group that you should be aware of before investing. 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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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.