YeboYethu (RF) (JSE:YYLBEE) Is Reducing Its Dividend To ZAR0.91

YeboYethu (RF) Limited's (JSE:YYLBEE) dividend is being reduced from last year's payment covering the same period to ZAR0.91 on the 10th of July. Based on this payment, the dividend yield will be 4.7%, which is lower than the average for the industry.

See our latest analysis for YeboYethu (RF)

YeboYethu (RF)'s Distributions May Be Difficult To Sustain

If it is predictable over a long period, even low dividend yields can be attractive. Even though YeboYethu (RF) isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share could fall by 13.3% over the next year if the trend of the last few years can't be broken. While this means that the company will be unprofitable, we generally believe cash flows are more important, and the current cash payout ratio is quite healthy, which gives us comfort.

YeboYethu (RF)'s Dividend Has Lacked Consistency

YeboYethu (RF) has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 6 years was ZAR1.12 in 2017, and the most recent fiscal year payment was ZAR1.61. This works out to be a compound annual growth rate (CAGR) of approximately 6.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. YeboYethu (RF) might have put its house in order since then, but we remain cautious.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. YeboYethu (RF)'s earnings per share has shrunk at 13% a year over the past five years. 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.

YeboYethu (RF)'s Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for YeboYethu (RF) (2 make us uncomfortable!) that you should be aware of before investing. Is YeboYethu (RF) not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.