Stock Analysis

EQB's (TSE:EQB) Upcoming Dividend Will Be Larger Than Last Year's

TSX:EQB
Source: Shutterstock

EQB Inc.'s (TSE:EQB) dividend will be increasing from last year's payment of the same period to CA$0.35 on 31st of March. Although the dividend is now higher, the yield is only 2.1%, which is below the industry average.

View our latest analysis for EQB

EQB's Payment Expected To Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end.

Having distributed dividends for at least 10 years, EQB has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, EQB's payout ratio sits at 16%, an extremely comfortable number that shows that it can pay its dividend.

The next 3 years are set to see EPS grow by 70.0%. The future payout ratio could be 16% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

historic-dividend
TSX:EQB Historic Dividend February 24th 2023

EQB Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was CA$0.24, compared to the most recent full-year payment of CA$1.40. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

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 impressed us by growing EPS at 8.3% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We should note that EQB has issued stock equal to 10% of shares outstanding. 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.

EQB Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for EQB (1 is significant!) that you should be aware of before investing. Is EQB not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether EQB is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.