Rogers Communications Inc. (TSE:RCI.B) will pay a dividend of CA$0.50 on the 4th of January. The dividend yield is 3.4% based on this payment, which is a little bit low compared to the other companies in the industry.
Rogers Communications' Payment Has Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Rogers Communications was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.
The next year is set to see EPS grow by 23.8%. If the dividend continues on this path, the payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.
Rogers Communications Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the dividend has gone from CA$1.42 to CA$2.00. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Has Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. Rogers Communications has seen EPS rising for the last five years, at 8.2% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
Overall, we think Rogers Communications is a solid choice as a dividend stock, even though the dividend wasn't raised this year. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Rogers Communications that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.
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