DLSI's (EPA:ALDLS) Shareholders Will Receive A Bigger Dividend Than Last Year

DLSI's (EPA:ALDLS) dividend will be increasing from last year's payment of the same period to €0.40 on 3rd of July. This makes the dividend yield about the same as the industry average at 3.0%.

View our latest analysis for DLSI

DLSI's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, DLSI's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 7.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 25%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €0.23 in 2013 to the most recent total annual payment of €0.40. This means that it has been growing its distributions at 5.7% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth Is Doubtful

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. Over the past five years, it looks as though DLSI's EPS has declined at around 7.5% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On DLSI's Dividend

In summary, while it's always good to see the dividend being raised, we don't think DLSI's payments are rock solid. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for DLSI (1 is concerning!) 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.