Should Income Investors Buy Transcontinental Inc (TSE:TCL.A) Before Its Ex-Dividend?

By
Simply Wall St
Published
December 30, 2017
TSX:TCL.A
Source: Shutterstock

Important news for shareholders and potential investors in Transcontinental Inc (TSX:TCL.A): The dividend payment of CA$0.2 per share will be distributed into shareholder on 23 January 2018, and the stock will begin trading ex-dividend at an earlier date, 03 January 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Transcontinental's latest financial data to analyse its dividend attributes. See our latest analysis for Transcontinental

What Is A Dividend Rock Star?

It is a stock that pays a consistent, reliable and competitive dividend over a long period of time, and is expected to continue to pay in the same manner many years to come. More specifically:

  • It is paying an annual yield above 75% of dividend payers
  • It has paid dividend every year without dramatically reducing payout in the past
  • Its dividend per share amount has increased over the past
  • It can afford to pay the current rate of dividends from its earnings
  • It has the ability to keep paying its dividends going forward
  • High Yield And Dependable

    Transcontinental currently yields 3.22%, which is high for commercial services and supplies stocks. But the real reason Transcontinental stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.

    TSX:TCL.A Historical Dividend Yield Dec 30th 17
    TSX:TCL.A Historical Dividend Yield Dec 30th 17
    If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. TCL.A has increased its DPS from CA$0.28 to CA$0.8 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. This is an impressive feat, which makes TCL.A a true dividend rockstar. Transcontinental has a payout ratio of 28.69%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect TCL.A's payout to increase to 33.91% of its earnings, which leads to a dividend yield of around 3.43%.

    What this means for you:

    Are you a shareholder? Investors of Transcontinental can continue to expect strong dividends from the stock. With its favorable dividend characteristics, if high income generation is still the goal for your portfolio, then Transcontinental is one worth keeping around. However, depending on your current holdings, it may be beneficial exploring other income stocks to improve your diversification, or even look at high-growth stocks to supplement your steady income stocks. I suggest continuing your research by taking a look at my interactive free list of dividend rockstars as well as high-growth stocks to potentially add to your holdings.

    Are you a potential investor? Transcontinental ticks all the boxes for what I look for in a dividend stock. If you are looking to build an income focused portfolio, this could be one to include. I also recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Whether or not you like the stock as a dividend play, it's still worth checking the price tag. Is Transcontinental overvalued or is it actually a bargain? Check our latest free analysis to find out!

    Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.

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