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

Stingray Group Inc. (TSE:RAY.A) has announced that it will pay a dividend of CA$0.075 per share on the 13th of June. This means the dividend yield will be fairly typical at 3.6%.

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Estimates Indicate Stingray Group's Dividend Coverage Likely To Improve

Unless the payments are sustainable, the dividend yield doesn't mean too much. Even though Stingray Group isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 11%, which we would be comfortable to see continuing.

View our latest analysis for Stingray Group

Stingray Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was CA$0.12, compared to the most recent full-year payment of CA$0.30. This means that it has been growing its distributions at 9.6% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Stingray Group's EPS has fallen by approximately 22% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Stingray Group's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Stingray Group is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Stingray Group that investors should know about before committing capital to this stock. 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.