Stock Analysis

TerraVest Industries (TSE:TVK) Has Affirmed Its Dividend Of CA$0.10

  •  Updated
TSX:TVK
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TerraVest Industries Inc.'s (TSE:TVK) investors are due to receive a payment of CA$0.10 per share on 12th of October. This means that the annual payment will be 1.8% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for TerraVest Industries

TerraVest Industries' Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, TerraVest Industries' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 27.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

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TSX:TVK Historic Dividend September 14th 2021

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. Since 2012, the first annual payment was CA$0.32, compared to the most recent full-year payment of CA$0.40. This means that it has been growing its distributions at 2.5% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that TerraVest Industries has grown earnings per share at 28% 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.

TerraVest Industries Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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. Taking the debate a bit further, we've identified 3 warning signs for TerraVest Industries that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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