Exco Technologies (TSE:XTC) Is Paying Out A Dividend Of CA$0.105

The board of Exco Technologies Limited (TSE:XTC) has announced that it will pay a dividend of CA$0.105 per share on the 31st of December. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

See our latest analysis for Exco Technologies

Exco Technologies' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Exco Technologies was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

If the trend of the last few years continues, EPS will grow by 3.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which is in the range that makes us comfortable with the sustainability of the dividend.

Exco Technologies Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from CA$0.20 total annually to CA$0.42. This works out to be a compound annual growth rate (CAGR) of approximately 7.7% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 3.5% per annum over the last five years, which admittedly is a bit slow. Growth of 3.5% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

We Really Like Exco Technologies' Dividend

Overall, we like to see the dividend staying consistent, and we think Exco Technologies might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Just as an example, we've come across 2 warning signs for Exco Technologies you should be aware of, and 1 of them doesn't sit too well with us. 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.