Cascades (TSE:CAS) Is Paying Out A Dividend Of CA$0.12

The board of Cascades Inc. (TSE:CAS) has announced that it will pay a dividend of CA$0.12 per share on the 5th of September. This means the annual payment is 5.4% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Cascades

Cascades' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Even though Cascades isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 7.3%, which we would be comfortable to see continuing.

Cascades Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was CA$0.16, compared to the most recent full-year payment of CA$0.48. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Over the past five years, it looks as though Cascades' EPS has declined at around 47% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Cascades you should be aware of, and 1 of them shouldn't be ignored. Is Cascades not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.