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The board of Stingray Group Inc. (TSE:RAY.A) has announced that it will pay a dividend of CA$0.075 per share on the 14th of March. This payment means that the dividend yield will be 3.5%, which is around the industry average.
See our latest analysis for Stingray Group
Estimates Indicate Stingray Group's Dividend Coverage Likely To Improve
We aren't too impressed by dividend yields unless they can be sustained over time. Even though Stingray Group isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. 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.
According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 11%, which we would be comfortable to see continuing.
Stingray Group Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2016, the dividend has gone from CA$0.12 total annually to CA$0.30. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Stingray Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Stingray Group's EPS has fallen by approximately 22% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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.
Stingray Group's Dividend Doesn't Look Sustainable
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 would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for Stingray Group that investors should take into consideration. 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.