ADENTRA's (TSE:ADEN) Dividend Will Be Increased To $0.15

ADENTRA Inc.'s (TSE:ADEN) dividend will be increasing from last year's payment of the same period to $0.15 on 31st of January. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.

Check out our latest analysis for ADENTRA

ADENTRA's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, ADENTRA was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 13.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was $0.16, compared to the most recent full-year payment of $0.416. This means that it has been growing its distributions at 10% per annum over that time. ADENTRA has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. ADENTRA has seen EPS rising for the last five years, at 13% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

An additional note is that the company has been raising capital by issuing stock equal to 12% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

ADENTRA Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that ADENTRA is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for ADENTRA (of which 1 can't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.