Total Energy Services Inc.'s (TSE:TOT) investors are due to receive a payment of CA$0.09 per share on 15th of July. This will take the annual payment to 3.9% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Total Energy Services
Total Energy Services' 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, Total Energy Services' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 161.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 16% by next year, which is in a pretty sustainable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CA$0.20 in 2014 to the most recent total annual payment of CA$0.36. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
Total Energy Services Could Grow Its Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Total Energy Services has been growing its earnings per share at 7.9% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Total Energy Services' prospects of growing its dividend payments in the future.
In Summary
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Total Energy Services that investors should know about before committing capital to this stock. Is Total Energy Services not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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About TSX:TOT
Total Energy Services
Operates as an energy services company primarily in Canada, the United States, and Australia.
Flawless balance sheet, good value and pays a dividend.
