Stock Analysis

EQB (TSE:EQB) Has Announced That It Will Be Increasing Its Dividend To CA$0.37

TSX:EQB
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EQB Inc.'s (TSE:EQB) dividend will be increasing from last year's payment of the same period to CA$0.37 on 30th of June. Despite this raise, the dividend yield of 2.2% is only a modest boost to shareholder returns.

View our latest analysis for EQB

EQB's Payment Expected To Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive.

EQB has a long history of paying out dividends, with its current track record at a minimum of 10 years. Using data from its latest earnings report, EQB's payout ratio sits at 17%, an extremely comfortable number that shows that it can pay its dividend.

The next 3 years are set to see EPS grow by 62.2%. Analysts estimate the future payout ratio will be 16% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

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TSX:EQB Historic Dividend May 22nd 2023

EQB Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was CA$0.28 in 2013, and the most recent fiscal year payment was CA$1.48. This means that it has been growing its distributions at 18% 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.

EQB Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. EQB has seen EPS rising for the last five years, at 9.5% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for EQB's prospects of growing its dividend payments in the future.

An additional note is that the company has been raising capital by issuing stock equal to 10% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like EQB's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for EQB (1 is significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.