Exco Technologies (TSE:XTC) Will Pay A Dividend Of CA$0.105

Exco Technologies Limited (TSE:XTC) has announced that it will pay a dividend of CA$0.105 per share on the 28th of March. This makes the dividend yield 5.6%, which will augment investor returns quite nicely.

Check out our latest analysis for Exco Technologies

Exco Technologies' Payment Has 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 comfortably covered by Exco Technologies' earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 91% indicates it is more focused on returning cash to shareholders than growing the business.

EPS is set to fall by 4.4% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 68%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Exco Technologies Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$0.18 in 2014 to the most recent total annual payment of CA$0.42. This implies that the company grew its distributions at a yearly rate of about 8.8% over that duration. 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.

Exco Technologies May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. In the last five years, Exco Technologies' earnings per share has shrunk at approximately 4.4% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Exco Technologies (1 is a bit concerning!) that you should be aware of before investing. 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.