Develop North PLC's (LON:DVNO) investors are due to receive a payment of £0.01 per share on 28th of December. This means the annual payment will be 5.0% 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. Prior to this announcement, the company was paying out 544% of what it was earning and 89% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.
EPS is set to fall by 32.7% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 695%, which could put the dividend in jeopardy if the company's earnings don't improve.
Develop North's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was £0.06, compared to the most recent full-year payment of £0.04. Doing the maths, this is a decline of about 6.5% per year. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings per share has been sinking by 33% 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.
Develop North's Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Develop North has 4 warning signs (and 1 which is potentially serious) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About LSE:DVNO
Develop North
An investment company, provides a portfolio of fixed rate loans primarily secured over land and property in the United Kingdom.
Solid track record with adequate balance sheet.
