Shaw Communications (TSE:SJR.B) Has Re-Affirmed Its Dividend Of CA$0.099

Shaw Communications Inc.'s (TSE:SJR.B) investors are due to receive a payment of CA$0.099 per share on 29th of June. This means that the annual payment will be 3.3% of the current stock price, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Shaw Communications' stock price has increased by 63% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Shaw Communications

Shaw Communications' Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before this announcement, Shaw Communications was paying out 83% of earnings, but a comparatively small 63% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, earnings per share is forecast to fall by 4.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 88%, which is definitely on the higher side.

Shaw Communications Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the dividend has gone from CA$0.88 to CA$1.19. This implies that the company grew its distributions at a yearly rate of about 3.0% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Shaw Communications May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, Shaw Communications' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Slow growth and a high payout ratio could mean that Shaw Communications has maxed out the amount that it has been able to pay to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On Shaw Communications' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Shaw Communications' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for Shaw Communications that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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