Stella-Jones (TSE:SJ) Is Paying Out A Larger Dividend Than Last Year

Stella-Jones Inc. (TSE:SJ) will increase its dividend from last year's comparable payment on the 18th of April to CA$0.31. Despite this raise, the dividend yield of 1.8% is only a modest boost to shareholder returns.

Check out our latest analysis for Stella-Jones

Stella-Jones' Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Stella-Jones was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 12.4%. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

Stella-Jones Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was CA$0.28, compared to the most recent full-year payment of CA$1.24. This works out to be a compound annual growth rate (CAGR) of approximately 16% 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Stella-Jones has grown earnings per share at 19% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Stella-Jones' prospects of growing its dividend payments in the future.

We Really Like Stella-Jones' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 1 warning sign for Stella-Jones that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.