Decisive Dividend Corporation. Buy, Sell or Hold?

Beacon Securities analyst Russell Stanley is looking for another step down in payout ratio when Decisive Dividend Corporation (Decisive Dividend Stock Quote, Chart, News, Analysts, Financials TSXV:DE) reports third-quarter results after market close Nov. 4. Stanley reiterated his positive view on the Kelowna-based acquirer of niche manufacturers, projecting results that remain slightly ahead of consensus.

He is maintaining his “buy” rating and $11.00 price target.

Stanley is forecasting revenue of $38.3-million and Adjusted EBITDA of $6.3-million, versus the Street at $37.0-million and $6.3-million, respectively. He expects free cash flow less maintenance capex of $3.4-million, or 17 cents per share, supporting further improvement in the dividend payout ratio.

“Based on our forecast, we expect the LTM payout ratio to inch lower to 73% from 74% in Q2, representing a significant improvement over the recent peak payout ratio of 96%,” Stanley said, noting management drove the metric below its <75% target a quarter earlier than expected. He said Q3 results, integration progress on past acquisitions and commentary on demand across the portfolio will be key areas of focus, alongside the potential for additional M&A.

Decisive Dividend acquires and operates profitable, well-established manufacturing businesses with durable competitive positions and strong cash flow profiles. The company follows a “buy-build-hold” strategy aimed at providing succession solutions for legacy-minded owners while pursuing steady growth.

Stanley highlighted a valuation gap compared with Exchange Income Corporation, a long-time income-focused peer. With Decisive yielding roughly 6.8% versus EIC at 3.4%, he said the stock would need to double to nearly $16 to align its yield with EIC, or rise more than 36% to reach the stock’s March 2024 yield low of 5.0%.

He also pointed to an improving technical picture, with shares recently breaking through resistance around $7.90 and continuing to trend upward.

“The relative-strength line is testing the downtrend,” he said, suggesting momentum is shifting back in the company’s favour.

Stanley said Decisive should produce $27-million in Adjusted EBITDA on $154-million of revenue in fiscal 2025, improving to $33-million on $165-million in fiscal 2026.

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