Western Forest Products (TSE:WEF) Has Affirmed Its Dividend Of CA$0.01

The board of Western Forest Products Inc. (TSE:WEF) has announced that it will pay a dividend of CA$0.01 per share on the 18th of March. This makes the dividend yield 1.9%, which will augment investor returns quite nicely.

Check out our latest analysis for Western Forest Products

Western Forest Products' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Western Forest Products was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 34.1%. If the dividend continues along recent trends, we estimate the payout ratio could be 8.8%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Western Forest Products' Dividend Has Lacked Consistency

Western Forest Products has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The first annual payment during the last 9 years was CA$0.08 in 2013, and the most recent fiscal year payment was CA$0.04. This works out to be a decline of approximately 7.4% 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. Western Forest Products has impressed us by growing EPS at 21% per year over the past five years. 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.

Western Forest Products Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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. All in all, this checks a lot of the boxes we look for when choosing an 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Western Forest Products (1 is potentially serious!) 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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