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EQB Inc. (TSE:EQB) will increase its dividend from last year's comparable payment on the 31st of March to CA$0.51. Even though the dividend went up, the yield is still quite low at only 2.0%.
Check out our latest analysis for EQB
EQB's Earnings Will Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.
Having distributed dividends for at least 10 years, EQB has a long history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 18% also shows that EQB is able to comfortably pay dividends.
Over the next year, EPS is forecast to expand by 14.8%. If the dividend continues along recent trends, we estimate the future payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.
EQB Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$0.34 in 2015 to the most recent total annual payment of CA$2.04. This means that it has been growing its distributions at 20% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. EQB has seen EPS rising for the last five years, at 11% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like EQB's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for EQB that investors need to be conscious of moving forward. Is EQB not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.