Vecima Networks (TSE:VCM) Has Affirmed Its Dividend Of CA$0.055

Vecima Networks Inc. (TSE:VCM) will pay a dividend of CA$0.055 on the 6th of November. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Vecima Networks

Vecima Networks' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Vecima Networks' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 23.1% over the next year. If the dividend continues on this path, the payout ratio could be 17% by next year, which we think can be pretty sustainable going forward.

Vecima Networks Doesn't Have A Long Payment History

Vecima Networks' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of CA$0.18 in 2014 to the most recent total annual payment of CA$0.22. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Vecima Networks has seen EPS rising for the last five years, at 46% per annum. 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.

Our Thoughts On Vecima Networks' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. Taking the debate a bit further, we've identified 1 warning sign for Vecima Networks that investors need to be conscious of moving forward. 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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