Exchange Income (TSE:EIF) Will Pay A Dividend Of CA$0.22

The board of Exchange Income Corporation (TSE:EIF) has announced that it will pay a dividend on the 15th of April, with investors receiving CA$0.22 per share. The dividend yield will be 5.2% based on this payment which is still above the industry average.

Exchange Income's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the dividend made up 104% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Over the next year, EPS is forecast to expand by 85.4%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 61% which would be quite comfortable going to take the dividend forward.

View our latest analysis for Exchange Income

Exchange Income Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$1.68 in 2015 to the most recent total annual payment of CA$2.64. This means that it has been growing its distributions at 4.6% per annum over that time. 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.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Unfortunately, Exchange Income's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Exchange Income's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Exchange Income is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Exchange Income 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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