Keg Royalties Income Fund (TSE:KEG.UN) Has Announced A Dividend Of CA$0.0946

The Keg Royalties Income Fund's (TSE:KEG.UN) investors are due to receive a payment of CA$0.0946 per share on 30th of May. The dividend yield will be 6.2% based on this payment which is still above the industry average.

Our free stock report includes 2 warning signs investors should be aware of before investing in Keg Royalties Income Fund. Read for free now.

Keg Royalties Income Fund's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Keg Royalties Income Fund's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the company can't turn things around, EPS could fall by 19.0% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 91% in the next 12 months which is on the higher end of the range we would say is sustainable.

View our latest analysis for Keg Royalties Income Fund

Keg Royalties Income Fund 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 2015, the annual payment back then was CA$0.96, compared to the most recent full-year payment of CA$1.14. This means that it has been growing its distributions at 1.7% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 19% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Taking the debate a bit further, we've identified 2 warning signs for Keg Royalties Income Fund that investors need to be conscious of moving forward. Is Keg Royalties Income Fund not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.