ADENTRA's (TSE:ADEN) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of ADENTRA Inc. (TSE:ADEN) has announced that it will be paying its dividend of $0.13 on the 28th of July, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.8%.

View our latest analysis for ADENTRA

ADENTRA's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, ADENTRA's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 13.8% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 16%, which is comfortable for the company to continue in the future.

ADENTRA Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.12, compared to the most recent full-year payment of $0.378. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that ADENTRA has grown earnings per share at 31% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

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. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for ADENTRA (1 doesn't sit too well with us!) that you should be aware of before investing. 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.