Stock Analysis

Aecon Group's (TSE:ARE) Dividend Will Be CA$0.19

TSX:ARE
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The board of Aecon Group Inc. (TSE:ARE) has announced that it will pay a dividend on the 3rd of July, with investors receiving CA$0.19 per share. The dividend yield will be 4.6% based on this payment which is still above the industry average.

Check out our latest analysis for Aecon Group

Aecon Group's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Aecon Group was paying only paying out a fraction of earnings, but the payment was a massive 4,233% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to fall by 35.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 47%, which is comfortable for the company to continue in the future.

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TSX:ARE Historic Dividend June 8th 2024

Aecon Group 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. Since 2014, the annual payment back then was CA$0.32, compared to the most recent full-year payment of CA$0.76. This means that it has been growing its distributions at 9.0% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Aecon Group has seen EPS rising for the last five years, at 18% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Aecon Group's payments, as there could be some issues with sustaining them into the future. While Aecon Group is earning enough to cover the payments, the cash flows are lacking. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Aecon Group (of which 1 doesn't sit too well with us!) 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.