Compass Diversified (NYSE:CODI) Has Affirmed Its Dividend Of $0.25
The board of Compass Diversified (NYSE:CODI) has announced that it will pay a dividend on the 26th of January, with investors receiving $0.25 per share. This means the annual payment is 5.2% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Compass Diversified
Compass Diversified Is Paying Out More Than It Is Earning
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even though Compass Diversified is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.
EPS is forecast to rise very quickly over the next 12 months. Assuming the dividend continues along recent trends, we could see the payout ratio reach 237%, which is on the unsustainable side.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from $1.44 total annually to $1.00. The dividend has shrunk at around 3.6% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth May Be Hard To Achieve
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Compass Diversified hasn't seen much change in its earnings per share over the last five years. Compass Diversified isn't actually turning a profit, which makes it much harder for us to see how they can grow dividends.
Compass Diversified'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 track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Compass Diversified you should be aware of, and 2 of them are concerning. Is Compass Diversified 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.
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