Waterloo Brewing Ltd. (TSE:WBR) will pay a dividend of CA$0.0304 on the 2nd of November. This means that the annual payment will be 2.8% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Waterloo Brewing

Waterloo Brewing Doesn't Earn Enough To Cover Its Payments

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Looking forward, EPS could fall by 16.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 417%, which could put the dividend in jeopardy if the company's earnings don't improve.

Waterloo Brewing Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2015, the annual payment back then was CA$0.048, compared to the most recent full-year payment of CA$0.122. This means that it has been growing its distributions at 14% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Over the past five years, it looks as though Waterloo Brewing's EPS has declined at around 16% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Waterloo Brewing's Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, the dividend is not reliable enough to make this a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Waterloo Brewing you should be aware of, and 2 of them can't be ignored. Is Waterloo Brewing not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.