Duratec (ASX:DUR) Will Pay A Dividend Of A$0.015

Duratec Limited (ASX:DUR) has announced that it will pay a dividend of A$0.015 per share on the 7th of May. Based on this payment, the dividend yield for the company will be 3.2%, which is fairly typical for the industry.

See our latest analysis for Duratec

Duratec's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Duratec was paying only paying out a fraction of earnings, but the payment was a massive 267% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 28.9% over the next year. If the dividend continues on this path, the payout ratio could be 55% by next year, which we think can be pretty sustainable going forward.

Duratec Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2022, the dividend has gone from A$0.015 total annually to A$0.04. This implies that the company grew its distributions at a yearly rate of about 63% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Duratec has grown earnings per share at 19% per year over the past three years. With a decent amount of growth and a low payout ratio, we think this bodes well for Duratec's prospects of growing its dividend payments in the future.

Our Thoughts On Duratec's Dividend

Overall, we always like to see the dividend being raised, but we don't think Duratec will make a great income stock. While Duratec is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Duratec that investors should take into consideration. Is Duratec not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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