Vecima Networks (TSE:VCM) Has Announced A Dividend Of CA$0.055

Vecima Networks Inc. (TSE:VCM) will pay a dividend of CA$0.055 on the 3rd of November. This payment means the dividend yield will be 2.1%, which is below the average for the industry.

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Vecima Networks' Projections Indicate Future Payments May Be Unsustainable

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Vecima Networks' profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share is forecast to rise by 117.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 174%, which probably can't continue without putting some pressure on the balance sheet.

Check out our latest analysis for Vecima Networks

Vecima Networks Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from CA$0.18 total annually to CA$0.22. This implies that the company grew its distributions at a yearly rate of about 2.0% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Vecima Networks' Dividend Might Lack Growth

Investors could be attracted to the stock based on the quality of its payment history. Vecima Networks has impressed us by growing EPS at 17% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Vecima Networks 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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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.