Trican Well Service's (TSE:TCW) Dividend Will Be Increased To CA$0.045

Trican Well Service Ltd. (TSE:TCW) has announced that it will be increasing its periodic dividend on the 29th of March to CA$0.045, which will be 13% higher than last year's comparable payment amount of CA$0.04. This makes the dividend yield 3.8%, which is above the industry average.

View our latest analysis for Trican Well Service

Trican Well Service's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Trican Well Service's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 14.0% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 30%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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 2014, the dividend has gone from CA$0.30 total annually to CA$0.16. This works out to be a decline of approximately 6.1% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Trican Well Service has seen EPS rising for the last five years, at 65% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Trican Well Service's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Trican Well Service you should be aware of, and 1 of them is concerning. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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