DSW Capital (LON:DSW) Will Pay A Dividend Of £0.012

DSW Capital plc (LON:DSW) has announced that it will pay a dividend of £0.012 per share on the 16th of January. This takes the dividend yield to 6.1%, which shareholders will be pleased with.

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DSW Capital's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, DSW Capital's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Unless the company can turn things around, EPS could fall by 42.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 0.1%, which we are pretty comfortable with and we think is feasible on an earnings basis.

See our latest analysis for DSW Capital

DSW Capital's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of £0.0422 in 2022 to the most recent total annual payment of £0.03. Dividend payments have fallen sharply, down 29% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though DSW Capital's EPS has declined at around 42% a year. 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 DSW Capital's Dividend

In summary, while it's always good to see the dividend being raised, we don't think DSW Capital'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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, DSW Capital has 4 warning signs (and 1 which is significant) we think you should know about. Is DSW Capital not quite the opportunity you were looking for? Why not check out our selection of top 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.