Keyera (TSE:KEY) Has Affirmed Its Dividend Of CA$0.16

The board of Keyera Corp. (TSE:KEY) has announced that it will pay a dividend of CA$0.16 per share on the 16th of May. This means the annual payment is 5.7% of the current stock price, which is above the average for the industry.

View our latest analysis for Keyera

Keyera Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

The next 12 months is set to see EPS grow by 14.5%. If the dividend continues on its recent course, the payout ratio in 12 months could be 121%, which is a bit high and could start applying pressure to the balance sheet.

Keyera Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was CA$0.92, compared to the most recent full-year payment of CA$1.92. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Keyera May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, Keyera has only grown its earnings per share at 4.0% per annum over the past five years. The earnings growth is anaemic, and the company is paying out 131% of its profit. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

Keyera's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Keyera that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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