In This Article:
Dexterra Group Inc. (TSE:DXT) has announced that it will pay a dividend of CA$0.0875 per share on the 15th of October. This makes the dividend yield 5.8%, which will augment investor returns quite nicely.
View our latest analysis for Dexterra Group
Dexterra Group's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Dexterra Group's dividend made up quite a large proportion of earnings but only 40% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
The next year is set to see EPS grow by 37.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 68%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
Dexterra Group Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of CA$0.30 in 2020 to the most recent total annual payment of CA$0.35. This implies that the company grew its distributions at a yearly rate of about 3.9% over that duration. Dexterra Group hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
Dexterra Group Might Find It Hard To Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Dexterra Group has impressed us by growing EPS at 10% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Dexterra Group's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Dexterra Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.