The board of Exco Technologies Limited( TSE:XTC ) has announced that it will pay a dividend of CA$0.105 per share on the 31st of March. This makes the dividend yield 6.0%, which will augment investor returns quite nicely.
Exco Technologies' Projected Earnings Seem Likely To Cover Future Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Exco Technologies' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, EPS could fall by 3.0% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 70%, which we are pretty comfortable with and we think is feasible on an earnings basis.
View our latest analysis for Exco Technologies
Exco Technologies Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2016, the annual payment back then was CA$0.24, compared to the most recent full-year payment of CA$0.42. This works out to be a compound annual growth rate (CAGR) of approximately 5.8% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend's Growth Prospects Are Limited
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Exco Technologies has seen earnings per share falling at 3.0% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
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. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Exco Technologies that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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