AirBoss of America Corp.'s (TSE:BOS) dividend is being reduced from last year's payment covering the same period to $0.035 on the 15th of July. This means that the annual payment will be 4.6% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for AirBoss of America

AirBoss of America's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. AirBoss of America is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 1.7%, which we would be comfortable to see continuing.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.19 in 2014 to the most recent total annual payment of $0.203. Its dividends have grown at less than 1% per annum over this time frame. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. AirBoss of America's EPS has fallen by approximately 37% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

AirBoss of America's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for AirBoss of America that you should be aware of before investing. Is AirBoss of America not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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