Pason Systems (TSE:PSI) Has Announced A Dividend Of CA$0.13

Pason Systems Inc. (TSE:PSI) will pay a dividend of CA$0.13 on the 30th of June. This makes the dividend yield 4.5%, which will augment investor returns quite nicely.

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Pason Systems' Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Pason Systems' earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 13.1%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Pason Systems

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from CA$0.60 total annually to CA$0.52. Doing the maths, this is a decline of about 1.4% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Pason Systems has grown earnings per share at 8.3% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Pason Systems' 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Pason Systems that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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