Yahoo Finance Pizza Pizza Royalty (TSE:PZA) Has Affirmed Its Dividend Of CA$0.06
The board of Pizza Pizza Royalty Corp. (TSE:PZA) has announced that it will pay a dividend of CA$0.06 per share on the 15th of December. This makes the dividend yield 5.6%, which will augment investor returns quite nicely.
See our latest analysis for Pizza Pizza Royalty
Pizza Pizza Royalty Doesn't Earn Enough To Cover Its Payments
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Pizza Pizza Royalty's was paying out quite a large proportion of earnings and 91% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.
Looking forward, EPS could fall by 3.6% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 95%, which could put the dividend under pressure if earnings don't start to improve.
Pizza Pizza Royalty's Track Record Isn't Great
The dividend is currently lower than it was 10 years ago, indicating that there has been a downward trend over that time. Since 2011, the first annual payment was CA$0.93, compared to the most recent full-year payment of CA$0.68. This works out to be a decline of approximately 3.1% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Pizza Pizza Royalty's earnings per share has shrunk at approximately 3.6% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
Our Thoughts On Pizza Pizza Royalty's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pizza Pizza Royalty's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Pizza Pizza Royalty you should be aware of, and 1 of them doesn't sit too well with us. We have also put together a list of global stocks with a solid dividend.
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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