Cogeco Communications' (TSE:CCA) Shareholders Will Receive A Bigger Dividend Than Last Year

Cogeco Communications Inc. (TSE:CCA) will increase its dividend from last year's comparable payment on the 28th of November to CA$0.922. This takes the annual payment to 5.1% of the current stock price, which is about average for the industry.

View our latest analysis for Cogeco Communications

Cogeco Communications' Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Cogeco Communications was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 0.9%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Cogeco Communications Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was CA$1.20, compared to the most recent full-year payment of CA$3.69. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 3.0% per year. Growth of 3.0% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

We Really Like Cogeco Communications' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Cogeco Communications that you should be aware of before investing. Is Cogeco Communications not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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