Develop North (LON:DVNO) Has Affirmed Its Dividend Of £0.01

The board of Develop North PLC (LON:DVNO) has announced that it will pay a dividend of £0.01 per share on the 30th of June. This means the annual payment will be 4.9% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Develop North

Develop North Is Paying Out More Than It Is Earning

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. 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 14.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 213%, which could put the dividend under pressure if earnings don't start to improve.

Develop North's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the dividend has gone from £0.06 total annually to £0.04. The dividend has shrunk at around 6.5% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though Develop North's EPS has declined at around 14% 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.

We're Not Big Fans Of Develop North's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Develop North make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. The dividend doesn't inspire confidence that it will provide solid income in the future.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for Develop North you should be aware of, and 2 of them make us uncomfortable. Is Develop North not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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