Yahoo Finance Deterra Royalties (ASX:DRR) Is Paying Out A Larger Dividend Than Last Year
Deterra Royalties Limited (ASX:DRR) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of September to A$0.2208. Despite this raise, the dividend yield of 7.3% is only a modest boost to shareholder returns.
View our latest analysis for Deterra Royalties
Deterra Royalties Is Paying Out More Than It Is Earning
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, the company was paying out 100% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
Over the next year, EPS is forecast to fall by 29.2%. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 141%, which is definitely a bit high to be sustainable going forward.
Deterra Royalties 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.
Deterra Royalties' Dividend Might Lack Growth
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Deterra Royalties will be very happy to have seen its EPS grow by 105% in just the last 12 months. It's nice to see earnings per share rising, but one year is too short a period to get excited about. Were this trend to continue, we'd be interested. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit. Any one year of performance can be misleading for a variety of reasons, so we wouldn't like to form any strong conclusions based on these numbers alone.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think Deterra Royalties will make a great income stock. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for Deterra Royalties that investors should know about before committing capital to this stock. Is Deterra Royalties 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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