Yahoo Finance Dominion Lending Centres (TSE:DLCG) Will Pay A Dividend Of CA$0.03
The board of Dominion Lending Centres Inc. (TSE:DLCG) has announced that it will pay a dividend of CA$0.03 per share on the 14th of June. This means that the annual payment will be 3.6% of the current stock price, which is in line with the average for the industry.
View our latest analysis for Dominion Lending Centres
Dominion Lending Centres Doesn't Earn Enough To Cover Its Payments
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, the company was paying out 211% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 40%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
Over the next year, EPS could expand by 24.6% 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 201% over the next year.
Dominion Lending Centres' Dividend Has Lacked Consistency
It's comforting to see that Dominion Lending Centres has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the annual payment back then was CA$0.05, compared to the most recent full-year payment of CA$0.12. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
Dominion Lending Centres Might Find It Hard To Grow Its Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Dominion Lending Centres has seen EPS rising for the last five years, at 25% per annum. While EPS is growing rapidly, Dominion Lending Centres paid out a very high 211% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Dominion Lending Centres is a great stock to add to your portfolio if income is your focus.
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. For example, we've identified 4 warning signs for Dominion Lending Centres (1 is a bit concerning!) that you should be aware of before investing. 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.
