Dusk Group Limited (ASX:DSK) is reducing its dividend to AU$0.10 on the 28th of March. The yield is still above the industry average at 7.6%.

See our latest analysis for Dusk Group

Dusk Group's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Dusk Group was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 11.3% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 70%, which is comfortable for the company to continue in the future. historic-dividend

Dusk Group Doesn't Have A Long Payment History

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend 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.

Dusk Group May Find It Hard To Grow The Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings per share is flat over the past year. Performance in any given year is not a huge concern, but we'd point out that all of the best dividend stocks regularly grow their earnings over the long term. 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.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. 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 don't think Dusk Group is a great stock to add to your portfolio if income is your focus.

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 example, we've picked out 1 warning sign for Dusk Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.