Diales (LON:DIAL) Has Announced A Dividend Of £0.0075

Diales Plc (LON:DIAL) will pay a dividend of £0.0075 on the 10th of April. This means the annual payment is 6.7% of the current stock price, which is above the average for the industry.

View our latest analysis for Diales

Diales' Projections Indicate Future Payments May Be Unsustainable

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Looking forward, EPS could fall by 30.9% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 269%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from £0.0165 total annually to £0.015. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Diales' EPS has fallen by approximately 31% 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.

Diales' 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's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Diales has 3 warning signs (and 1 which can't be ignored) we think you should know about. Is Diales not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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