Keyera's (TSE:KEY) Dividend Will Be CA$0.16

Keyera Corp. (TSE:KEY) will pay a dividend of CA$0.16 on the 15th of March. This means the annual payment is 6.2% of the current stock price, which is above the average for the industry.

View our latest analysis for Keyera

Keyera Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 266% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share is forecast to rise by 126.2% over the next year. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 125% over the next year.

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$0.96, 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 7.2% a year 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 May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. It's not great to see that Keyera's earnings per share has fallen at approximately 8.9% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

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. Although they have been consistent in the past, we think the payments are a little high to be sustained. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Keyera (1 is concerning!) that you should be aware of before investing. Is Keyera 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.