Cargojet (TSE:CJT) Is Paying Out A Dividend Of CA$0.286

The board of Cargojet Inc. (TSE:CJT) has announced that it will pay a dividend on the 5th of July, with investors receiving CA$0.286 per share. This payment means the dividend yield will be 1.1%, which is below the average for the industry.

View our latest analysis for Cargojet

Cargojet's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Cargojet is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to fall by 67.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 23%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Cargojet Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was CA$0.568, compared to the most recent full-year payment of CA$1.14. This implies that the company grew its distributions at a yearly rate of about 7.3% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Cargojet has seen EPS rising for the last five years, at 52% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Cargojet's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Cargojet's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Cargojet you should be aware of, and 2 of them are potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.