Treasure's (OB:TRE) Dividend Is Being Reduced To $0.60

Treasure ASA's (OB:TRE) dividend is being reduced from last year's payment covering the same period to $0.60 on the 11th of May. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

See our latest analysis for Treasure

Treasure Might Find It Hard To Continue The Dividend

A big dividend yield for a few years doesn't mean much if it can't be sustained. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.

Over the next year, EPS could expand by 15.5% if recent trends continue. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Treasure's Dividend Has Lacked Consistency

Looking back, Treasure's dividend hasn't been particularly consistent. 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 $0.0345, compared to the most recent full-year payment of $0.0918. This means that it has been growing its distributions at 18% per annum over that time. Treasure has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Company Could Face Some Challenges Growing 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. We are encouraged to see that Treasure has grown earnings per share at 16% per year over the past five years. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.

Treasure's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. Strong earnings growth means Treasure has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Treasure that investors need to be conscious of moving forward. 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.