Yahoo Finance ARC Resources (TSE:ARX) Is Increasing Its Dividend To CA$0.17
ARC Resources Ltd. (TSE:ARX) has announced that it will be increasing its dividend from last year's comparable payment on the 17th of July to CA$0.17. Even though the dividend went up, the yield is still quite low at only 3.5%.
View our latest analysis for ARC Resources
ARC Resources' 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. However, ARC Resources' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
The next year is set to see EPS grow by 26.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.5% by next year, which is in a pretty sustainable range.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of CA$1.20 in 2013 to the most recent total annual payment of CA$0.60. Doing the maths, this is a decline of about 6.7% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's encouraging to see that ARC Resources has been growing its earnings per share at 41% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We Really Like ARC Resources' Dividend
Overall, a dividend increase is always good, and we think that ARC Resources is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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 2 warning signs for ARC Resources you should be aware of, and 1 of them is significant. Is ARC Resources not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
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