DSW Capital's (LON:DSW) Dividend Will Be Reduced To £0.0075

DSW Capital plc (LON:DSW) has announced that on 27th of September, it will be paying a dividend of£0.0075, which a reduction from last year's comparable dividend. The dividend yield of 3.4% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for DSW Capital

DSW Capital Might Find It Hard To Continue The Dividend

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. While DSW Capital is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS might fall by 63.4% based on recent performance. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

DSW Capital's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The dividend has gone from an annual total of £0.0422 in 2022 to the most recent total annual payment of £0.02. Dividend payments have fallen sharply, down 53% over that time. 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 dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Earnings per share has been sinking by 63% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

DSW Capital's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 5 warning signs for DSW Capital you should be aware of, and 1 of them is a bit unpleasant. 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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