Yahoo Finance ARC Resources (TSE:ARX) Is Paying Out A Larger Dividend Than Last Year
The board of ARC Resources Ltd. (TSE:ARX) has announced that it will be increasing its dividend on the 15th of July to CA$0.12. This takes the annual payment to 2.4% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for ARC Resources
ARC Resources' Earnings Easily Cover the Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. The last dividend was quite easily covered by ARC Resources' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
The next year is set to see EPS grow by 148.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 16% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was CA$1.20 in 2012, and the most recent fiscal year payment was CA$0.40. This works out to a decline of approximately 67% over that time. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend's Growth Prospects Are Limited
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. However, ARC Resources' EPS was effectively flat over the past five years, which could stop the company from paying more every year.
Our Thoughts On ARC Resources' Dividend
In summary, while it's always good to see the dividend being raised, we don't think ARC Resources' payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for ARC Resources that you should be aware of before investing. 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.
