Exco Technologies Limited (TSE:XTC) Is About To Go Ex-Dividend, And It Pays A 6.2% Yield

Readers hoping to buy Exco Technologies Limited (TSE:XTC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Exco Technologies' shares before the 15th of September in order to be eligible for the dividend, which will be paid on the 29th of September.

The company's next dividend payment will be CA$0.105 per share, on the back of last year when the company paid a total of CA$0.42 to shareholders. Based on the last year's worth of payments, Exco Technologies has a trailing yield of 6.2% on the current stock price of CA$6.78. If you buy this business for its dividend, you should have an idea of whether Exco Technologies's dividend is reliable and sustainable. So we need to investigate whether Exco Technologies can afford its dividend, and if the dividend could grow.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Exco Technologies paid out 68% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for Exco Technologies

Click here to see how much of its profit Exco Technologies paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Exco Technologies's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Exco Technologies has lifted its dividend by approximately 7.7% a year on average.

To Sum It Up

Has Exco Technologies got what it takes to maintain its dividend payments? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. To summarise, Exco Technologies looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So if you want to do more digging on Exco Technologies, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 1 warning sign for Exco Technologies and you should be aware of this before buying any shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.