Keyera (TSE:KEY) Is Due To Pay A Dividend Of CA$0.16

By
Simply Wall St
Published
December 20, 2021
TSX:KEY
Source: Shutterstock

Keyera Corp. (TSE:KEY) will pay a dividend of CA$0.16 on the 17th of January. The dividend yield will be 6.8% based on this payment which is still above the industry average.

View our latest analysis for Keyera

Keyera Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 266% of what it was earning. 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 125.6%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 125%, which probably can't continue putting some pressure on the balance sheet.

historic-dividend
TSX:KEY Historic Dividend December 20th 2021

Keyera Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the dividend has gone from CA$0.96 to CA$1.92. This means that it has been growing its distributions at 7.2% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Keyera's EPS has declined at around 8.9% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Keyera (1 makes us a bit uncomfortable!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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