Develop North (LON:DVNO) Will Pay A Dividend Of £0.01

Develop North PLC (LON:DVNO) will pay a dividend of £0.01 on the 28th of June. This means the dividend yield will be fairly typical at 5.1%.

See our latest analysis for Develop North

Develop North Doesn't Earn Enough To Cover Its Payments

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

EPS is set to fall by 20.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 430%, which is definitely a bit high to be sustainable going forward.

Develop North's Dividend Has Lacked Consistency

Looking back, Develop North's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 7 years was £0.06 in 2017, and the most recent fiscal year payment was £0.04. This works out to be a decline of approximately 5.6% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Develop North's EPS has declined at around 20% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Develop North's Dividend Doesn't Look Great

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's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.

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. Case in point: We've spotted 4 warning signs for Develop North (of which 1 is a bit unpleasant!) you should know about. 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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