Exco Technologies (TSE:XTC) Has Affirmed Its Dividend Of CA$0.105

Exco Technologies Limited (TSE:XTC) will pay a dividend of CA$0.105 on the 30th of June. This makes the dividend yield 5.6%, which will augment investor returns quite nicely.

See our latest analysis for Exco Technologies

Exco Technologies' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. Generally, we think that this would be a risky long term practice.

Looking forward, earnings per share is forecast to rise by 12.2% over the next year. If the dividend continues on this path, the payout ratio could be 71% by next year, which we think can be pretty sustainable going forward.

Exco Technologies Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from CA$0.15 total annually to CA$0.42. This means that it has been growing its distributions at 11% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Exco Technologies' EPS has declined at around 8.8% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Exco Technologies' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Exco Technologies is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. Is Exco Technologies 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.