Chemtrade Logistics Income Fund (TSE:CHE.UN) Is Due To Pay A Dividend Of CA$0.055

Chemtrade Logistics Income Fund's (TSE:CHE.UN) investors are due to receive a payment of CA$0.055 per share on 28th of March. This will take the dividend yield to an attractive 8.1%, providing a nice boost to shareholder returns.

Check out our latest analysis for Chemtrade Logistics Income Fund

Chemtrade Logistics Income Fund Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Chemtrade Logistics Income Fund was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 91.1% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach over 200%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from CA$1.20 total annually to CA$0.66. This works out to be a decline of approximately 5.8% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Chemtrade Logistics Income Fund has seen EPS rising for the last five years, at 47% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Chemtrade Logistics Income Fund Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Chemtrade Logistics Income Fund is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Chemtrade Logistics Income Fund you should be aware of, and 1 of them makes us a bit uncomfortable. Is Chemtrade Logistics Income Fund not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.