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Euroz Hartleys Group's (ASX:EZL) Dividend Will Be Reduced To A$0.0175

Euroz Hartleys Group Limited's (ASX:EZL) dividend is being reduced by 30% to A$0.0175 per share on 16th of February, in comparison to last year's comparable payment of A$0.025. However, the dividend yield of 6.8% is still a decent boost to shareholder returns.

See our latest analysis for Euroz Hartleys Group

Euroz Hartleys Group Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 109% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

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If the company can't turn things around, EPS could fall by 23.8% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 121%, which is definitely a bit high to be sustainable going forward.

historic-dividend
historic-dividend

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of A$0.0765 in 2014 to the most recent total annual payment of A$0.06. Doing the maths, this is a decline of about 2.4% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Euroz Hartleys Group's earnings per share has shrunk at 24% 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.

Euroz Hartleys Group's Dividend Doesn't Look Great

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, the dividend is not reliable enough to make this a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Euroz Hartleys Group (of which 1 is a bit concerning!) you should know about. Is Euroz Hartleys Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.