The board of Lorne Park Capital Partners Inc. (CVE:LPC) has announced that it will pay a dividend on the 31st of October, with investors receiving CA$0.008 per share. This takes the dividend yield to 2.3%, which shareholders will be pleased with.

Check out our latest analysis for Lorne Park Capital Partners

Estimates Indicate Lorne Park Capital Partners' Could Struggle to Maintain Dividend Payments In The Future

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Lorne Park Capital Partners was paying out 88% of earnings, but a comparatively small 33% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to grow by 19.5% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 98%, which probably can't continue without starting to put some pressure on the balance sheet.

Lorne Park Capital Partners Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The annual payment during the last 4 years was CA$0.02 in 2020, and the most recent fiscal year payment was CA$0.032. This means that it has been growing its distributions at 12% per annum over that time. 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.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. Lorne Park Capital Partners has seen EPS rising for the last five years, at 20% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Lorne Park Capital Partners' payments are rock solid. 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Lorne Park Capital Partners has 3 warning signs (and 1 which is potentially serious) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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