Duke Capital's (LON:DUKE) Dividend Will Be £0.007

Duke Capital Limited's (LON:DUKE) investors are due to receive a payment of £0.007 per share on 14th of April. Based on this payment, the dividend yield on the company's stock will be 9.3%, which is an attractive boost to shareholder returns.

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Duke Capital's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Duke Capital was paying out 114% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

EPS is set to grow by 64.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 90%, which is on the higher side, but certainly still feasible.

Check out our latest analysis for Duke Capital

Duke Capital's Dividend Has Lacked Consistency

Looking back, Duke Capital's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the annual payment back then was £0.0196, compared to the most recent full-year payment of £0.028. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Duke Capital May Find It Hard To Grow The Dividend

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. Unfortunately, Duke Capital's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

We should note that Duke Capital has issued stock equal to 21% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Duke Capital'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's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Duke Capital (1 is significant!) that you should be aware of before investing. Is Duke 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.