Keyera (TSE:KEY) Is Paying Out A Larger Dividend Than Last Year

The board of Keyera Corp. (TSE:KEY) has announced that it will be increasing its dividend by 3.8% on the 30th of September to CA$0.54, up from last year's comparable payment of CA$0.52. The payment will take the dividend yield to 4.9%, which is in line with the average for the industry.

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Keyera's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, Keyera was paying out 88% of earnings, but a comparatively small 75% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 36.3%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 69% which brings it into quite a comfortable range.

Check out our latest analysis for Keyera

Keyera Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was CA$1.29 in 2015, and the most recent fiscal year payment was CA$2.08. This implies that the company grew its distributions at a yearly rate of about 4.9% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Keyera Might Find It Hard To Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Keyera has impressed us by growing EPS at 12% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On Keyera's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. With a reasonable track record and good earnings coverage, the payments look sustainable. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. As an example, we've identified 1 warning sign for Keyera that you should be aware of before investing. 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.