The board of North American Construction Group Ltd. (TSE:NOA) has announced that it will pay a dividend of CA$0.04 per share on the 8th of October. This payment means the dividend yield will be 0.9%, which is below the average for the industry.
North American Construction Group's Payment Has Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, North American Construction Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 47.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 9.0%, which is in the range that makes us comfortable with the sustainability of the dividend.
North American Construction Group Doesn't Have A Long Payment History
It is great to see that North American Construction Group has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2014, the first annual payment was CA$0.08, compared to the most recent full-year payment of CA$0.16. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. North American Construction Group has impressed us by growing EPS at 54% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
We Really Like North American Construction Group's Dividend
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for North American Construction Group you should be aware of, and 1 of them is a bit concerning. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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