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 29th of December. This means the annual payment is 5.4% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Exco Technologies

Exco Technologies' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite comfortably covered by Exco Technologies' earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

EPS is set to fall by 7.5% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 73%, 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. The annual payment during the last 10 years was CA$0.18 in 2013, and the most recent fiscal year payment was CA$0.42. This means that it has been growing its distributions at 8.8% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. It's not great to see that Exco Technologies' earnings per share has fallen at approximately 7.5% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Exco Technologies' payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Exco Technologies that investors should take into consideration. 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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