Acadian Timber (TSE:ADN) Is Due To Pay A 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 July. This makes the dividend yield 6.9%, which will augment investor returns quite nicely.

See our latest analysis for Acadian Timber

Acadian Timber Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Acadian Timber's dividend was only 53% of earnings, however it was paying out 175% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS is forecast to fall by 54.8%. If the dividend continues along recent trends, we estimate the payout ratio could reach 123%, which could put the dividend in jeopardy if the company's earnings don't improve.

Acadian Timber Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was CA$0.825 in 2013, and the most recent fiscal year payment was CA$1.16. This means that it has been growing its distributions at 3.5% per annum 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Acadian Timber has seen EPS rising for the last five years, at 5.3% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

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. We don't think Acadian Timber is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Acadian Timber has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. 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.