Duke Royalty (LON:DUKE) Is Paying Out A Dividend Of £0.007

Duke Royalty Limited (LON:DUKE) has announced that it will pay a dividend of £0.007 per share on the 12th of April. Based on this payment, the dividend yield on the company's stock will be 8.6%, which is an attractive boost to shareholder returns.

See our latest analysis for Duke Royalty

Duke Royalty Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Duke Royalty's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

EPS is set to fall by 68.2% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 155%, which is definitely a bit high to be sustainable going forward.

Duke Royalty's Dividend Has Lacked Consistency

Duke Royalty has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of £0.0196 in 2017 to the most recent total annual payment of £0.028. This means that it has been growing its distributions at 6.1% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Duke Royalty has seen EPS rising for the last five years, at 54% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We should note that Duke Royalty has issued stock equal to 17% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Duke Royalty's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Duke Royalty's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Duke Royalty is a great stock to add to your portfolio if income is your focus.

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. Just as an example, we've come across 4 warning signs for Duke Royalty you should be aware of, and 2 of them are potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.