The board of Exco Technologies Limited (TSE:XTC) has announced that it will pay a dividend on the 30th of September, with investors receiving CA$0.10 per share. The dividend yield will be 3.9% based on this payment which is still above the industry average.
Exco Technologies' Earnings Easily Cover the Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Exco Technologies' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 12.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.
Exco Technologies Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2011, the dividend has gone from CA$0.10 to CA$0.40. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Unfortunately, Exco Technologies' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Overall, we think Exco Technologies is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Exco Technologies that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.
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Exco Technologies Limited, together with its subsidiaries, designs, develops, manufactures, and sells dies, molds, components and assemblies, and consumable equipment for the die-cast, extrusion, and automotive industries.
Excellent balance sheet average dividend payer.