Acadian Timber (TSE:ADN) Has Affirmed Its Dividend Of CA$0.29

The board of Acadian Timber Corp. (TSE:ADN) has announced that it will pay a dividend of CA$0.29 per share on the 15th of October. Based on this payment, the dividend yield on the company's stock will be 6.3%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Acadian Timber

Acadian Timber Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment was quite easily covered by earnings, but it made up 173% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to fall by 55.3%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 121%, which could put the dividend under pressure if earnings don't start to improve.

Acadian Timber Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of CA$0.825 in 2013 to the most recent total annual payment of CA$1.16. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

We Could See Acadian Timber's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. Acadian Timber has seen EPS rising for the last five years, at 7.6% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On Acadian Timber's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Acadian Timber's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Acadian Timber (1 makes us a bit uncomfortable!) 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.