Teck Resources (TSE:TECK.B) Has Affirmed Its Dividend Of CA$0.125

Teck Resources Limited (TSE:TECK.B) has announced that it will pay a dividend of CA$0.125 per share on the 31st of March. Including this payment, the dividend yield on the stock will be 0.9%, which is a modest boost for shareholders' returns.

See our latest analysis for Teck Resources

Teck Resources' Future Dividend Projections Seem Positive

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Teck Resources is unprofitable despite paying a dividend, and it is paying out 162% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.

Earnings per share is forecast to rise by 177.6% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 78% which is a bit high but can definitely be sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of CA$0.90 in 2015 to the most recent total annual payment of CA$0.50. Doing the maths, this is a decline of about 5.7% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Company Could Face Some Challenges Growing The Dividend

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that Teck Resources has been growing its earnings per share at 26% a year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

Teck Resources' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Teck Resources' payments, as there could be some issues with sustaining them into the future. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 15 Teck Resources analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.