Chemtrade Logistics Income Fund (TSE:CHE.UN) Has Affirmed Its Dividend Of CA$0.05

Chemtrade Logistics Income Fund (TSE:CHE.UN) has announced that it will pay a dividend of CA$0.05 per share on the 27th of September. The dividend yield will be 6.8% based on this payment which is still above the industry average.

See our latest analysis for Chemtrade Logistics Income Fund

Chemtrade Logistics Income Fund Might Find It Hard To Continue The Dividend

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Chemtrade Logistics Income Fund isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS is forecast to rise by 90.2%. It's encouraging to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.

Chemtrade Logistics Income Fund's Track Record Isn't Great

While the company's dividend hasn't been very volatile, it has been decreasing over time, which isn't ideal. Since 2012, the annual payment back then was CA$1.20, compared to the most recent full-year payment of CA$0.60. This works out to be a decline of approximately 6.7% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Chemtrade Logistics Income Fund's EPS has fallen by approximately 38% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

An additional note is that the company has been raising capital by issuing stock equal to 11% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Chemtrade Logistics Income Fund's Dividend

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. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Chemtrade Logistics Income Fund 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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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.