Vulcan Steel (ASX:VSL) Has Announced A Dividend Of NZ$0.1389

The board of ( ) has announced that it will pay a dividend on the 10th of October, with investors receiving NZ$0.1389 per share. Based on this payment, the dividend yield will be 3.

0%, which is lower than the average for the industry. Even a low dividend yield can be attractive if it is sustained for years on end. The last payment made up 79% of earnings, but cash flows were much higher.



In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment. Looking forward, earnings per share is forecast to rise by 152.2% over the next year.

Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 35% which brings it into quite a comfortable range. Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of NZ$0.

55 in 2021 to the most recent total annual payment of NZ$0.24. Dividend payments have fallen sharply, down 56% over that time.

A company that decreases its dividend over time generally isn't what we are looking for. With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings has been rising at 2.

1% per annum over the last five years, which admittedly is a bit slow. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

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 Vulcan Steel 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. To that end, Vulcan Steel has we think you should know about.

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