Stingray Group (TSE:RAY.A): A Dividend Play Amid Earnings Volatility? Assessing the 3.0% Yield's Long-Term Viability

When evaluating dividend stocks, investors often balance yield with sustainability. Stingray Group (TSE:RAY.A), a media and entertainment company, offers a 3.02% dividend yield as of August 2025, with a quarterly payout of CA$0.075 per share. The next dividend is set for September 15, 2025, and the ex-dividend date is August 29. But is this yield a compelling opportunity—or a red flag? Let's dissect the numbers.

The Numbers Behind the Yield

Stingray's dividend appears well-supported at first glance. Its payout ratio is 45% based on earnings and 20.8% based on cash flow, suggesting the company retains ample capital for reinvestment and debt reduction. However, the yield's sustainability must be contextualized against earnings trends. In Q4 2024, Stingray reported a net loss of $46.3 million, or $0.67 per share, but this reversed sharply in Q4 2025, with net income of $7.7 million, or $0.11 per share. This turnaround underscores volatility but also highlights the company's ability to recover.

The key question is whether this recovery is structural or cyclical. Stingray's Broadcasting and Commercial Music segment now accounts for 43.6% of revenue, driven by FAST (Free Ad-Supported Streaming TV) channel sales. This shift to recurring revenue streams—such as licensing music and ambient content for connected TVs—has stabilized cash flows. For Q1 2026, cash flow from operations reached $19.0 million, and adjusted free cash flow hit $18.8 million, up from $15.5 million in Q1 2025.

Risks and Red Flags

While cash flow coverage is robust, earnings volatility remains a concern. The payout ratio of 45% is low by historical standards, but it masks the fact that earnings per share (EPS) in Q4 2025 ($0.27) were still below pre-2024 levels. For context, in 2023, Stingray's EPS was $0.35. A dip in earnings—even if temporary—could strain the dividend if cash flow growth stalls.

Another risk is the company's reliance on the media and advertising sector, which is sensitive to macroeconomic shifts. For example, a slowdown in digital ad spending or a decline in FAST channel demand could pressure revenue. However, Stingray's recent partnerships—such as its collaboration with IAB Canada to expand in-store audio advertising—suggest it's diversifying its revenue base.

The Buyback Factor: Total Shareholder Yield

Stingray isn't just rewarding shareholders through dividends. In Q1 2026 alone, it repurchased and cancelled 342,000 shares for $3.1 million, contributing to a buyback yield of 1.1%. Combined with the 3.02% dividend yield, this creates a total shareholder yield of 4.1%, outpacing many Canadian dividend stocks. This dual approach to capital returns—dividends and buybacks—reinforces confidence in management's commitment to shareholder value.

The Verdict: Buy, Hold, or Avoid?

For income-focused investors, Stingray's 3.02% yield is attractive, especially given its low payout ratios and improving leverage (net debt/EBITDA of 2.24x as of Q1 2026). The company's pivot to recurring revenue and digital advertising also positions it to weather macroeconomic headwinds better than traditional media peers.

However, the yield's sustainability hinges on two factors:
1. Continued growth in FAST channel sales and in-store audio advertising.
2. Stable or improving operating margins, which would ensure cash flow remains uncapped.

If these trends hold, Stingray could be a compelling addition to a diversified dividend portfolio. But investors should monitor quarterly earnings closely, particularly in Q3 2025, to ensure the recovery isn't a one-off.

Final Thoughts

Stingray Group's dividend isn't just a yield—it's a signal of strategic reinvention. By leveraging digital transformation and shareholder-friendly policies, the company has turned a recent earnings slump into a foundation for long-term stability. For those willing to accept moderate risk in exchange for a 3.0% yield with strong cash flow support, Stingray could be a worthwhile bet. Just don't ignore the broader media landscape's volatility.