ADT (NYSE:ADT) Has Re-Affirmed Its Dividend Of US$0.035

The board of ADT Inc. (NYSE:ADT) has announced that it will pay a dividend on the 5th of July, with investors receiving US$0.035 per share. This payment means that the dividend yield will be 2.1%, which is around the industry average.

Check out our latest analysis for ADT

ADT's Distributions May Be Difficult To Sustain

Solid dividend yields are great, but they only really help us if the payment is sustainable. ADT isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This is quite a strong warning sign that the dividend may not be sustainable.

Over the next year, EPS is forecast to expand by 81.9%. This is the right direction to be moving, but it is not enough to achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

ADT Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The payments haven't really changed that much since 4 years ago. ADT hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. ADT's earnings per share has shrunk at 14% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

We're Not Big Fans Of ADT's Dividend

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. 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. We don't think that this is a great candidate to be an income stock.

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 2 warning signs for ADT you should be aware of, and 1 of them is 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.