In This Article:
The board of Aecon Group Inc. (TSE:ARE) has announced that it will pay a dividend of CA$0.19 per share on the 3rd of January. This means the annual payment is 2.8% of the current stock price, which is above the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Aecon Group's stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Aecon Group
Aecon Group's Future Dividend Projections Seem Positive
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even though Aecon Group isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 9.3%, so there isn't too much pressure on the dividend.
Aecon Group Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was CA$0.36, compared to the most recent full-year payment of CA$0.76. This works out to be a compound annual growth rate (CAGR) of approximately 7.8% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth May Be Hard To Achieve
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Aecon Group's earnings per share has shrunk at approximately 3.5% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Aecon Group's payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.