Dream Unlimited's (TSE:DRM) Dividend Will Be CA$0.15

Dream Unlimited Corp.'s (TSE:DRM) investors are due to receive a payment of CA$0.15 per share on 28th of June. This takes the dividend yield to 3.1%, which shareholders will be pleased with.

View our latest analysis for Dream Unlimited

Dream Unlimited Might Find It Hard To Continue The Dividend

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Despite not generating a profit, Dream Unlimited 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.

Analysts expect the EPS to grow by 84.5% over the next 12 months. This is the right direction to be moving, but it is not enough to achieve profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Dream Unlimited Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2019, the annual payment back then was CA$0.20, compared to the most recent full-year payment of CA$0.60. This implies that the company grew its distributions at a yearly rate of about 25% over that duration. Dream Unlimited has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

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. Unfortunately things aren't as good as they seem. Dream Unlimited's earnings per share has shrunk at 28% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Dream Unlimited's Dividend Doesn't Look Great

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Dream Unlimited 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.