Cenkos Securities plc's (LON:CNKS) dividend is being reduced from last year's payment covering the same period to £0.005 on the 22nd of June. However, the dividend yield of 4.1% still remains in a typical range for the industry.
See our latest analysis for Cenkos Securities
Cenkos Securities' Distributions May Be Difficult To Sustain
Unless the payments are sustainable, the dividend yield doesn't mean too much. Even though Cenkos Securities is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.
Over the next year, EPS might fall by 33.3% based on recent performance. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was £0.05 in 2013, and the most recent fiscal year payment was £0.015. The dividend has fallen 70% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Has Limited Growth Potential
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Cenkos Securities' earnings per share has shrunk at 33% 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.
Cenkos Securities' 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's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Cenkos Securities (2 don't sit too well with us!) that you should be aware of before investing. Is Cenkos Securities not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.