Is Decisive Dividend stock overpriced?

Beacon Securities analyst Russell Stanley is maintaining a “Buy” rating and $9.00 target price on Decisive Dividend Corporation (Decisive Dividend Corporation Stock Quote, Chart, News, Analysts, Financials TSXV:DE) ahead of the company’s Q2 results, scheduled for release after market close on August 6. In a July 30 report, Stanley noted the stock has been hitting new 52-week highs and that his revenue and Adjusted EBITDA estimates of $30.4-million and $3.5-million remain below consensus at $32.7-million and $4.4-million, respectively.

He added that while Q2 is typically a softer quarter for some of Decisive’s businesses, management flagged a strong outlook in May, citing a 60% year-over-year increase in backlog at the end of Q1 and higher year-to-date orders and sales. Stanley’s forecast calls for Decisive to return to the upper end of its target dividend payout ratio by Q3.

Stanley noted Decisive Dividend completed two small UK acquisitions last week for $0.8-million in cash and said more M&A activity is likely to follow.

“These transactions allow its existing Techbelt business to expand its belting product lineup/diversify the product suite, while adding fabrication and servicing capabilities, including staff,” he said. “While small, the acquisition is consistent with management’s stated M&A strategy of adding to existing verticals. Importantly, management added that it continues to see a strong flow of further M&A opportunities, with the terms on the recently extended credit facility supporting further M&A activity. We therefore expect continued acquisition activity in F2025.”

Stanley said the company recently extended the maturity of its $175-million syndicated revolving credit facility from March 2027 to June 2028. The facility remains interest-only until maturity and includes a $100-million committed revolver, $39-million of which was available as of early May, and a $75-million accordion. The leverage covenant was relaxed to a 3.5x maximum from 3.25x, compared to a reported 2.7x for Q1 2025. The variable rate facility carried an effective interest rate of 6% as of June 10.

He added that with the stock up 46% since its October 2024 low, the yield has declined from 10.5% to 6.7%. A return to its prior low yield would imply a 34% rally from current levels.

“The stock would still have to rally another 34% to $10.80/sh to take the yield back to its March 2024 low of 5.0%,” he said. “DE would have to rally 68% from here to take its yield down to the 4.0% level currently offered by Exchange Income Fund.”

Stanley projects the company will do $27-million in Adjusted EBITDA on revenue of $147-million in fiscal 2025. He thinks those numbers will improve to $31-million on revenue of $155-million in fiscal 2026.

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