Vecima Networks' (TSE:VCM) Dividend Will Be CA$0.055

Vecima Networks Inc.'s (TSE:VCM) investors are due to receive a payment of CA$0.055 per share on 23rd of June. This payment means that the dividend yield will be 2.3%, which is around the industry average.

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Vecima Networks' Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, the company was paying out 145% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 7.7%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next year is set to see EPS grow by 169.6%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 55% which would be quite comfortable going to take the dividend forward.

View our latest analysis for Vecima Networks

Vecima Networks Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was CA$0.18 in 2015, and the most recent fiscal year payment was CA$0.22. This works out to be a compound annual growth rate (CAGR) of approximately 2.0% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Vecima Networks Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Vecima Networks has been growing its earnings per share at 52% a year over the past five years. Although earnings per share is up nicely Vecima Networks is paying out 145% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Vecima Networks is a great stock to add to your portfolio if income is your focus.

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. For example, we've picked out 3 warning signs for Vecima Networks that investors should know about before committing capital to this stock. Is Vecima Networks not quite the opportunity you were looking for? Why not check out our selection of top 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.