Yahoo Finance DDH1's (ASX:DDH) Dividend Will Be Reduced To A$0.0196
DDH1 Limited (ASX:DDH) is reducing its dividend from last year's comparable payment to A$0.0196 on the 28th of September. However, the dividend yield of 6.0% still remains in a typical range for the industry.
View our latest analysis for DDH1
DDH1's Earnings Easily Cover The Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend was quite easily covered by DDH1's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to rise by 55.5% over the next year. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.
DDH1's Dividend Has Lacked Consistency
Even in its short history, we have seen the dividend cut. The annual payment during the last 2 years was A$0.0218 in 2021, and the most recent fiscal year payment was A$0.0529. This works out to be a compound annual growth rate (CAGR) of approximately 56% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. DDH1 has impressed us by growing EPS at 17% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
We Really Like DDH1's Dividend
It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that DDH1 has the makings of a solid income stock moving forward. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for DDH1 that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
