Dyno Nobel Limited (ASX:DNL) is reducing its dividend to A$0.024 on the 3rd of Julywhich is 44% less than last year's comparable payment of A$0.043. The dividend yield will be in the average range for the industry at 4.0%.

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Dyno Nobel's Long-term Dividend Outlook appears Promising

Unless the payments are sustainable, the dividend yield doesn't mean too much. Dyno Nobel is not generating a profit, and despite this is paying out most of its free cash flow as a dividend. Paying a dividend while unprofitable is generally considered an aggressive policy, and with limited funds retained for reinvestment, growth may be slow.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 37%, which makes us pretty comfortable with the sustainability of the dividend.ASX:DNL Historic Dividend May 14th 2025

See our latest analysis for Dyno Nobel

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was A$0.108, compared to the most recent full-year payment of A$0.106. The dividend has shrunk at a rate of less than 1% a year over this period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 31% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Dyno Nobel's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Dyno Nobel that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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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