Develop North (LON:DVNO) Is Due To Pay A Dividend Of £0.01

Develop North PLC (LON:DVNO) will pay a dividend of £0.01 on the 30th of September. This payment means the dividend yield will be 4.7%, which is below the average for the industry.

View our latest analysis for Develop North

Develop North Will Pay Out More Than It Is Earning

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Develop North has established itself as a dividend paying company, given its 5-year history of distributing earnings to shareholders. Past distributions unfortunately do not guarantee future ones, and Develop North's last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This value is at an alarming sign that could mean that Develop North's dividend at its current rate may no longer be sustainable for longer.

EPS is set to fall by 10.5% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 160%, which is definitely a bit high to be sustainable going forward.

Develop North's Dividend Has Lacked Consistency

It's comforting to see that Develop North has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from £0.06 total annually to £0.04. The dividend has shrunk at around 7.8% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Develop North's EPS has fallen by approximately 10% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Develop North's Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. The dividend doesn't inspire confidence that it will provide solid income in the future.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 5 warning signs for Develop North (1 makes us a bit uncomfortable!) 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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