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Stingray Group Inc.'s (TSE:RAY.A) investors are due to receive a payment of CA$0.075 per share on 13th of June. This means that the annual payment will be 3.4% of the current stock price, which is in line with the average for the industry.
Stingray Group's Long-term Dividend Outlook appears Promising
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Stingray Group is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, so there isn't too much pressure on the dividend.
See our latest analysis for Stingray Group
Stingray Group Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was CA$0.12, compared to the most recent full-year payment of CA$0.30. This means that it has been growing its distributions at 9.6% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Stingray Group's earnings per share has shrunk at 22% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
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, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Stingray Group that investors need to be conscious of moving forward. 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.