Dexterra Group (TSE:DXT) Has Affirmed Its Dividend Of CA$0.0875

The board of Dexterra Group Inc. (TSE:DXT) has announced that it will pay a dividend on the 15th of January, with investors receiving CA$0.0875 per share. Based on this payment, the dividend yield on the company's stock will be 5.4%, which is an attractive boost to shareholder returns.

View our latest analysis for Dexterra Group

Dexterra Group's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Dexterra Group's dividend made up quite a large proportion of earnings but only 47% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

The next year is set to see EPS grow by 38.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 67%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dexterra Group Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2020, the annual payment back then was CA$0.30, compared to the most recent full-year payment of CA$0.35. This means that it has been growing its distributions at 3.9% per annum over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

We Could See Dexterra Group's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. Dexterra Group has seen EPS rising for the last five years, at 9.9% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Our Thoughts On Dexterra Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Dexterra Group's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income 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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 Dexterra Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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