Yahoo Finance Eumundi Group (ASX:EBG) Will Pay A Dividend Of A$0.035
Eumundi Group Limited's (ASX:EBG) investors are due to receive a payment of A$0.035 per share on 14th of March. This makes the dividend yield 5.6%, which will augment investor returns quite nicely.
See our latest analysis for Eumundi Group
Eumundi Group Is Paying Out More Than It Is Earning
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Looking forward, EPS could fall by 37.2% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 1,017%, which could put the dividend in jeopardy if the company's earnings don't improve.
Eumundi Group's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 years was A$0.04 in 2015, and the most recent fiscal year payment was A$0.07. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
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. Over the past five years, it looks as though Eumundi Group's EPS has declined at around 37% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
We're Not Big Fans Of Eumundi Group'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. Overall, this doesn't get us very excited from an income standpoint.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 7 warning signs for Eumundi Group you should be aware of, and 3 of them are significant. 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.
