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 26th of November to CA$0.987. This takes the dividend yield to 6.1%, which shareholders will be pleased with.

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Cogeco Communications' Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Cogeco Communications was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 2.0% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 55%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View our latest analysis for Cogeco Communications

Cogeco Communications Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was CA$1.40, compared to the most recent full-year payment of CA$3.95. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Unfortunately, Cogeco Communications' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Cogeco Communications 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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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.