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

The Keg Royalties Income Fund (TSE:KEG.UN) will pay a dividend of CA$0.0946 on the 30th of April. The dividend yield will be 8.4% based on this payment which is still above the industry average.

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Estimates Indicate Keg Royalties Income Fund's Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Keg Royalties Income Fund's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to fall by 13.1% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 192%, which could put the dividend in jeopardy if the company's earnings don't improve.

Check out 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. The dividend has gone from an annual total of CA$0.96 in 2015 to the most recent total annual payment of CA$1.14. This works out to be a compound annual growth rate (CAGR) of approximately 1.7% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 13% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Keg Royalties Income Fund's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 4 warning signs for Keg Royalties Income Fund (of which 2 are potentially serious!) you should know about. Is Keg Royalties Income Fund not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.