Rogers Communications (TSE:RCI.B) Will Pay A Dividend Of CA$0.50

editorial-team@simplywallst.com (Simply Wall St)

Sun, Nov 12, 2023, 5:02 AM 3 min read

Rogers Communications' Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Rogers Communications was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 33%, which makes us pretty comfortable with the sustainability of the dividend.

historic-dividend — TSX:RCI.B Historic Dividend November 12th 2023

Rogers Communications Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from CA$1.74 total annually to CA$2.00. This works out to be a compound annual growth rate (CAGR) of approximately 1.4% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

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. Earnings per share has been sinking by 13% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Rogers Communications' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Rogers Communications' payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Rogers Communications has 5 warning signs (and 1 which is a bit concerning) we think you should know about. Is Rogers Communications 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.