Yahoo Finance Dominion Lending Centres (TSE:DLCG) Is Due To Pay A Dividend Of CA$0.03
The board of Dominion Lending Centres Inc. (TSE:DLCG) has announced that it will pay a dividend on the 15th of December, with investors receiving CA$0.03 per share. The dividend yield will be 4.6% based on this payment which is still above the industry average.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Dominion Lending Centres' stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for Dominion Lending Centres
Dominion Lending Centres Doesn't Earn Enough To Cover Its Payments
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Dominion Lending Centres was paying out 1,098% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.
Over the next year, EPS could expand by 39.2% if the company continues along the path it has been on recently. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 933% over the next year.
Dominion Lending Centres' Dividend Has Lacked Consistency
Looking back, Dominion Lending Centres' 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 CA$0.05 in 2016, and the most recent fiscal year payment was CA$0.12. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
Dominion Lending Centres Might Find It Hard To Grow Its Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Dominion Lending Centres has been growing its earnings per share at 39% a year over the past five years. Although earnings per share is up nicely Dominion Lending Centres is paying out 1,098% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. 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. Case in point: We've spotted 4 warning signs for Dominion Lending Centres (of which 2 shouldn't be ignored!) you should know about. Is Dominion Lending Centres 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.
