Rogers Communications Inc. (TSE:RCI.B) has announced that it will pay a dividend of CA$0.50 per share on the 4th of July. This means the annual payment will be 3.1% of the current stock price, which is lower than the industry average.
Rogers Communications' Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Rogers Communications was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The business is earning enough to make the dividend feasible, but the cash payout ratio of 78% indicates it is more focused on returning cash to shareholders than growing the business.
The next year is set to see EPS grow by 16.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.
Rogers Communications Has A Solid Track Record
The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was CA$1.42 in 2012, and the most recent fiscal year payment was CA$2.00. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Rogers Communications has impressed us by growing EPS at 12% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
Our Thoughts On Rogers Communications' Dividend
Overall, we think Rogers Communications is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Rogers Communications that investors need to be conscious of moving forward. Is Rogers Communications not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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.