Vulcan Steel's (ASX:VSL) Dividend Is Being Reduced To NZ$0.305
Vulcan Steel Limited (ASX:VSL) is reducing its dividend from last year's comparable payment to NZ$0.305 on the 12th of October. The dividend yield will be in the average range for the industry at 6.4%.
Check out our latest analysis for Vulcan Steel
Vulcan Steel's Payment Has Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. Before this announcement, Vulcan Steel was paying out 82% of earnings, but a comparatively small 59% of free cash flows. This leaves plenty of cash for reinvestment into the business.
Over the next year, EPS is forecast to expand by 29.3%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 66% which would be quite comfortable going to take the dividend forward.
Vulcan Steel Is Still Building Its Track Record
Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
Vulcan Steel Might Find It Hard To Grow Its Dividend
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Vulcan Steel has been growing its earnings per share at 45% a year over the past three years. However, Vulcan Steel isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.
Our Thoughts On Vulcan Steel's Dividend
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Vulcan Steel that you should be aware of before investing. 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.
