Cascades Inc. (TSE:CAS) has announced that it will be increasing its dividend on the 2nd of September to CA$0.12, which will be 50% higher than last year. This makes the dividend yield 2.4%, which is above the industry average.

View our latest analysis for Cascades

Cascades' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Cascades was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 24.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

Cascades Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was CA$0.16 in 2011, and the most recent fiscal year payment was CA$0.32. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Cascades has been growing its earnings per share at 24% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Cascades' Dividend

Overall, a dividend increase is always good, and we think that Cascades is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Cascades that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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