Yahoo Finance Eildon Capital Fund's (ASX:EDC) Dividend Will Be AU$0.02
Eildon Capital Fund (ASX:EDC) has announced that it will pay a dividend of AU$0.02 per share on the 22nd of April. This means the annual payment is 8.0% of the current stock price, which is above the average for the industry.
See our latest analysis for Eildon Capital Fund
Eildon Capital Fund Doesn't Earn Enough To Cover Its Payments
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, Eildon Capital Fund was paying out 263% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.
Looking forward, EPS could fall by 32.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 421%, which is definitely a bit high to be sustainable going forward.
Eildon Capital Fund's Dividend Has Lacked Consistency
Looking back, Eildon Capital Fund's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from AU$0.055 in 2017 to the most recent annual payment of AU$0.079. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% 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. Eildon Capital Fund might have put its house in order since then, but we remain cautious.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Eildon Capital Fund's earnings per share has shrunk at 32% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
We're Not Big Fans Of Eildon Capital Fund's Dividend
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Eildon Capital Fund make more consistent payments in the future. 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. The dividend doesn't inspire confidence that it will provide solid income in the future.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Eildon Capital Fund has 5 warning signs (and 3 which don't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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