Transcontinental (TSE:TCL.A) Has Announced A Dividend Of CA$0.23

Transcontinental Inc.'s (TSE:TCL.A) investors are due to receive a payment of CA$0.23 per share on 20th of July. This makes the dividend yield 3.5%, which will augment investor returns quite nicely.

See our latest analysis for Transcontinental

Transcontinental's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Transcontinental's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 5.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 54%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Transcontinental 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. The first annual payment during the last 10 years was CA$0.36 in 2011, and the most recent fiscal year payment was CA$0.90. This means that it has been growing its distributions at 9.6% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Over the past five years, it looks as though Transcontinental's EPS has declined at around 5.0% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Transcontinental's Dividend

Overall, we think Transcontinental is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Transcontinental that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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