Exco Technologies' (TSE:XTC) Dividend Will Be CA$0.105

Exco Technologies Limited (TSE:XTC) has announced that it will pay a dividend of CA$0.105 per share on the 31st of March. Based on this payment, the dividend yield on the company's stock will be 6.4%, which is an attractive boost to shareholder returns.

View our latest analysis for Exco Technologies

Exco Technologies' Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Exco Technologies' earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, EPS could fall by 0.6% 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 62%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Exco Technologies Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. 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. 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

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. However, Exco Technologies' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, we think Exco Technologies is a solid choice as a dividend stock, even though the dividend wasn't raised this year. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Exco Technologies has 2 warning signs (and 1 which is significant) we think you should know about. 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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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.