The board of Alimentation Couche-Tard Inc. (TSE:ATD.B) has announced that it will be increasing its dividend on the 16th of December to CA$0.11. Even though the dividend went up, the yield is still quite low at only 0.8%.
Alimentation Couche-Tard's Earnings Easily Cover the Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Alimentation Couche-Tard's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 1.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.
Alimentation Couche-Tard Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the dividend has gone from US$0.034 to US$0.34. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Alimentation Couche-Tard has grown earnings per share at 20% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
We Really Like Alimentation Couche-Tard's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Alimentation Couche-Tard that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.
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