Do Dusk shares really have a 12% dividend yield right now?

It’s been a disastrous year for the candle and fragrance company so far, but the falling share price means a higher dividend yield.

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Key points

  • Dusk shares have been battered this year
  • The candle and fragrance company has lost almost half of its value over 2022
  • But this has pushed up Dusk's dividend yield to over 12%. Too good to be true?

It’s been a rough few months for ASX shares. The markets are experiencing something of a rebound today, with the All Ordinaries Index (ASX: XAO) up a decent 0.66% at the time of writing to back over 6,800 points.

But even so, the All Ords remains down by a painful 13.8% so far in 2022. But that’s nothing compared to the woes of Dusk Group Ltd (ASX: DSK) shares.

The Dusk share price is also rebounding today. The candle and fragrance company has bounced a healthy 3.42% so far today and is now going for $1.66 a share.

But that doesn’t quite hide what has been a disastrous year for the Dusk share price. It is still down around 48% in 2022 so far. The company has also lost 22.5% of its value over the past month alone.

But the misfortunes of this company have done something quite notable to Dusk’s apparent dividend yield.

Falling share prices do tend to mean higher starting dividend yields. And after such steep falls over 2022, Dusk shares’ trailing dividend yield now stands at a whopping 12% or so.

What’s more, Dusk’s dividends normally come fully franked. That means this company is sitting on a trailing, grossed-up yield of 17.16%.

Are Dusk shares really offering a 12% dividend yield today?

Well, technically, yes. Over the past 12 months, Dusk has paid out two fully franked dividends of 10 cents per share each. Given Dusk’s share price is only $1.66, this gives the company a trailing yield of 12%.

But can investors expect a 12% yield on their money today if they buy Dusk shares? Well, that’s the $64,000 question.

For this to be true, Dusk has to maintain or increase its dividends going forward. If the company pays out another final dividend of 10 cents later this year, and another interim dividend of 10 cents per share next year, investors can expect that 12% yield that the current pricing gives it.

But is this likely?

According to CommSec, Dusk is predicted to pay out 17.2 cents per share in dividends in 2022. That implies that Dusk’s upcoming final dividend will be 7.2 cents per share, rather than 10.

If that were to be true, it would result in Dusk’s forward dividend yield dropping to around 10.4% rather than 12%.

But CommSec is also predicting that Dusk’s dividends will rise to 20.1 cents per share in 2023, and to 22 cents by 2024.

If that also turned out to be true, it would give Dusk shares a forward dividend yield of 12.1% for 2023 and 13.25% for 2024 on current pricing.

No doubt investors will be hoping this prediction comes to pass. But we shall have to wait and see if Dusk investors indeed get their 12% this year and going forward.

Motley Fool contributor Sebastian Bowen has positions in Dusk Group Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dusk Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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