Yahoo Finance Neo Performance Materials (TSE:NEO) Has Affirmed Its Dividend Of $0.10
Neo Performance Materials Inc. (TSE:NEO) will pay a dividend of $0.10 on the 29th of September. Based on this payment, the dividend yield on the company's stock will be 2.8%, which is an attractive boost to shareholder returns.
View our latest analysis for Neo Performance Materials
Neo Performance Materials' Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Neo Performance Materials is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share is forecast to fall by 9.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 39%, which is comfortable for the company to continue in the future.
Neo Performance Materials Is Still Building Its Track Record
It is great to see that Neo Performance Materials has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the annual payment back then was $0.285, compared to the most recent full-year payment of $0.303. This means that it has been growing its distributions at 1.3% per annum over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Neo Performance Materials has been growing its earnings per share at 71% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Neo Performance Materials' payments, as there could be some issues with sustaining them into the future. While Neo Performance Materials is earning enough to cover the payments, the cash flows are lacking. We don't think Neo Performance Materials is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Neo Performance Materials (of which 2 are significant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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