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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 5.7%, which will augment investor returns quite nicely.
See our latest analysis for Dexterra Group
Dexterra Group's Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 76% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
The next year is set to see EPS grow by 37.0%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 68% which would be quite comfortable going to take the dividend forward.
Dexterra Group Is Still Building Its Track Record
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. 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 means that it has been growing its distributions at 3.9% per annum over that time. 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.
Dividend Growth Could Be Constrained
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Dexterra Group has seen EPS rising for the last five years, at 10% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
Our Thoughts On Dexterra Group's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 Dexterra Group is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Dexterra Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.