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Diversified Royalty (TSE:DIV) Has Affirmed Its Dividend Of CA$0.018

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Diversified Royalty Corp. (TSE:DIV) will pay a dividend of CA$0.018 on the 29th of July. Based on this payment, the dividend yield on the company's stock will be 8.1%, which is an attractive boost to shareholder returns.

View our latest analysis for Diversified Royalty

Diversified Royalty Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 101% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Looking forward, earnings per share is forecast to fall by 15.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 124%, which could put the dividend under pressure if earnings don't start to improve.

historic-dividend
historic-dividend

Diversified Royalty Doesn't Have A Long Payment History

Diversified Royalty's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2014, the dividend has gone from CA$0.19 to CA$0.22. This implies that the company grew its distributions at a yearly rate of about 2.0% over that duration. Diversified Royalty hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Diversified Royalty Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Diversified Royalty has grown earnings per share at 16% per year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Diversified Royalty's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means Diversified Royalty has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. 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. Taking the debate a bit further, we've identified 2 warning signs for Diversified Royalty that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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