Keyera (TSE:KEY) Is Paying Out A Dividend Of CA$0.16

The board of Keyera Corp. (TSE:KEY) has announced that it will pay a dividend on the 15th of August, with investors receiving CA$0.16 per share. This makes the dividend yield 6.4%, which will augment investor returns quite nicely.

Check out our latest analysis for Keyera

Keyera's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

EPS is set to grow by 62.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 78%, which is on the higher side, but certainly still feasible.

Keyera Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$0.96 in 2012 to the most recent total annual payment of CA$1.92. This means that it has been growing its distributions at 7.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

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 3.7% per annum over the past five years. The earnings growth is anaemic, and the company is paying out 120% of its profit. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Keyera's payments, as there could be some issues with sustaining them into the future. 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 don't think Keyera is a great stock to add to your portfolio if income is your focus.

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. Case in point: We've spotted 2 warning signs for Keyera (of which 1 makes us a bit uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.