The board of Rogers Communications Inc. (TSE:RCI.B) has announced that it will pay a dividend of CA$0.50 per share on the 4th of January. This payment means that the dividend yield will be 3.4%, which is around the industry average.
Rogers Communications' Payment Has Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite comfortably covered by Rogers Communications' earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.
The next year is set to see EPS grow by 26.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, which is in the range that makes us comfortable with the sustainability of the dividend.
Rogers Communications Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the dividend has gone from CA$1.42 to CA$2.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% 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.
Rogers Communications Could Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Rogers Communications has grown earnings per share at 8.2% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
Overall, a consistent dividend is a good thing, and we think that Rogers Communications has the ability to continue this into the future. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 1 warning sign for Rogers Communications that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.
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.
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