Acadian Timber (TSE:ADN) Is Paying Out A Dividend Of CA$0.29

Acadian Timber Corp. (TSE:ADN) has announced that it will pay a dividend of CA$0.29 per share on the 15th of January. Based on this payment, the dividend yield on the company's stock will be 7.9%, which is an attractive boost to shareholder returns.

Check out the opportunities and risks within the CA Forestry industry.

Acadian Timber Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 97% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

EPS is set to fall by 18.0% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 123%, which is definitely a bit high to be sustainable going forward.

Acadian Timber Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$0.825 in 2012 to the most recent total annual payment of CA$1.16. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Acadian Timber May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Unfortunately, Acadian Timber's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

The Dividend Could Prove To Be Unreliable

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. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Acadian Timber that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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