Q: How low would this need to go to become attractive. Is the market already suggesting a dividend cut may be on the way?
5i Research Answer:
Dividend yield is 6.92% which implies some investor concern. However, many stocks are near that level of yield, even much larger ones. As a small cap, the yield is probably about right, and we would not expect a cut in the short term. The dividend was cut in 2013 but has risen by 75% since then. Still, the balance sheet is very leveraged, with debt at more than 10X cash flow. It is a cyclical industry. Thus, even at 10X earnings, there are risks here. The stock has declined 31% in the past year. Payout ratio on cash flow is 75%. Considering all of this, we would consider it more attractive in the $17 to $18 range.