TerraVest Industries' (TSE:TVK) Dividend Will Be CA$0.10

The board of TerraVest Industries Inc. (TSE:TVK) has announced that it will pay a dividend of CA$0.10 per share on the 11th of July. This means the dividend yield will be fairly typical at 1.6%.

View our latest analysis for TerraVest Industries

TerraVest Industries' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, TerraVest Industries was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 42.0% over the next 12 months. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

TerraVest Industries' Dividend Has Lacked Consistency

It's comforting to see that TerraVest Industries has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 9 years was CA$0.32 in 2013, and the most recent fiscal year payment was CA$0.40. This implies that the company grew its distributions at a yearly rate of about 2.5% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that TerraVest Industries has grown earnings per share at 42% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On TerraVest Industries' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about TerraVest Industries' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 identified 2 warning signs for TerraVest Industries (1 is a bit concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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