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The board of Canlan Ice Sports Corp. (TSE:ICE) has announced that it will pay a dividend on the 16th of October, with investors receiving CA$0.03 per share. This payment means that the dividend yield will be 3.3%, which is around the industry average.
View our latest analysis for Canlan Ice Sports
Canlan Ice Sports Might Find It Hard To Continue The Dividend
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. While Canlan Ice Sports is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. 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.
Assuming the trend of the last few years continues, EPS will grow by 23.2% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CA$0.08 in 2014 to the most recent total annual payment of CA$0.12. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. 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.
The Company Could Face Some Challenges Growing The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Canlan Ice Sports has grown earnings per share at 23% per year over the past five years. The company hasn't been turning a profit, but it running in the right direction. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Canlan Ice Sports' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Canlan Ice Sports is a great stock to add to your portfolio if income is your focus.