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Exco Technologies Limited's (TSE:XTC) investors are due to receive a payment of CA$0.105 per share on 31st of March. This makes the dividend yield 6.4%, which will augment investor returns quite nicely.
Check out our latest analysis for Exco Technologies
Exco Technologies' Future Dividend Projections Appear Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Exco Technologies' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Unless the company can turn things around, EPS could fall by 0.6% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 62%, which is definitely feasible to continue.
Exco Technologies Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from CA$0.20 total annually to CA$0.42. This means that it has been growing its distributions at 7.7% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Although it's important to note that Exco Technologies' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
Our Thoughts On Exco Technologies' Dividend
Overall, a consistent dividend is a good thing, and we think that Exco Technologies has the ability to continue this into the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Exco Technologies has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Is Exco Technologies 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.