Decisive Dividend Corp. keeps “Buy” rating at Beacon

Following the company’s fourth quarter results, Beacon Securities analyst Russell Stanley has maintained his “Buy” rating on Decisive Dividend Corp (Decisive Dividend Corp Stock Quote, Chart, News, Analysts, Financials TSXV:DE).

On March 18, DE reported its Q4 and fiscal 2024 results. In the fourth quarter, the company posted Adjusted EBITDA of $7.3-million on Sales of $37.6-million, up from $35.7-million, year-over-year.

“2024 wrapped up with the strongest Q4 in the history of the business,” CEO Jeff Schellenberg said. “This strong performance was a result of the across-the-board effort of our subsidiaries to add profitable new customers and increase operating efficiency through the calendar year, which we saw beginning to bear fruit in Q3 2024 after a challenging first half of the year. The significant improvement in operating performance illustrates the quality of the portfolio of companies and the capability of their leadership teams to take steps to methodically improve subsidiary business performance.”

Stanley said there is one thing hanging over these better-than-expected results.

“DE reported record Q4 results that beat our formal estimates/consensus, reflecting improved demand, while adding that momentum has continued into Q1/25,” he wrote. “We believe the stock is still priced for a dividend cut, though the q/q improvement and Q1 outlook add to the body of evidence that DE will maintain its current dividend (now yielding 8.7%). Relative to Exchange Income Fund’s (EIF-TSX, Not Rated) current yield of 5.2%, DE’s share price would need to reach $10.40/sh (a 67% return from here) to equate its yield with EIF.”

In a research update to clients March 19, the analyst maintained his “Buy” rating and price target of $9.00, implying a return of 53%, including dividend.

The analyst thinks the company will post Adjusted EBITDA of $26.0-million on revenue of $139.0-million in fiscal 2025. He expects Adjusted EBITDA of $31.0-million on revenue of $150.0-million in fiscal 2026.

“With a current yield of 8.7% v. Exchange Income Fund’s (EIF-TSX, Not Rated) 5.3%, DE continues to price in a dividend cut,” Stanley added. “Given the strong Q4 results – featuring a 55% payout ratio for the quarter – and momentum continuing into Q1/25, the question becomes when should DE’s LTM payout ratio return to management’s target ceiling of 75%. While DE does not typically provide formal guidance, management predicted payout ratio improvement as the Q1-Q2/24 quarters are ‘lapped’. As shown in the exhibit, we expect DE to return to the 75% level in Q3/25.”