Yellow Pages (TSE:Y) Is Paying Out A Dividend Of CA$0.25

Yellow Pages Limited (TSE:Y) has announced that it will pay a dividend of CA$0.25 per share on the 17th of March. This makes the dividend yield 9.1%, which will augment investor returns quite nicely.

Check out our latest analysis for Yellow Pages

Yellow Pages' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Yellow Pages' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 12.6% over the next 12 months if recent trends continue. If recent patterns in the dividend continue, we could see the payout ratio reaching 79% in the next 12 months which is on the higher end of the range we would say is sustainable.

Yellow Pages Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 5 years was CA$0.44 in 2020, and the most recent fiscal year payment was CA$1.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% 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 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, initial appearances might be deceiving. Yellow Pages' EPS has fallen by approximately 13% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Yellow Pages' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Yellow Pages' payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 1 warning sign for Yellow Pages that you should be aware of before investing. 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.