Yahoo Finance Chemtrade Logistics Income Fund (TSE:CHE.UN) Is Due To Pay A Dividend Of CA$0.05
Chemtrade Logistics Income Fund (TSE:CHE.UN) has announced that it will pay a dividend of CA$0.05 per share on the 28th of March. This means the annual payment is 8.2% of the current stock price, which is above the average for the industry.
See our latest analysis for Chemtrade Logistics Income Fund
Chemtrade Logistics Income Fund's Distributions May Be Difficult To Sustain
If the payments aren't sustainable, a high yield for a few years won't matter that much. While Chemtrade Logistics Income Fund is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.
Looking forward, earnings per share is forecast to expand by 84.8% over the next year. It's encouraging to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.
Chemtrade Logistics Income Fund's Track Record Isn't Great
While the company's dividend hasn't been very volatile, it has been decreasing over time, which isn't ideal. Since 2012, the dividend has gone from CA$1.20 to CA$0.60. Doing the maths, this is a decline of about 6.7% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Has Limited Growth Potential
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Chemtrade Logistics Income Fund's EPS has fallen by approximately 36% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
We'd also point out that Chemtrade Logistics Income Fund has issued stock equal to 12% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
Our Thoughts On Chemtrade Logistics Income Fund's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Chemtrade Logistics Income Fund is a great stock to add to your portfolio if income is your focus.
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. For example, we've identified 2 warning signs for Chemtrade Logistics Income Fund (1 doesn't sit too well with us!) that you should be aware of before investing. Is Chemtrade Logistics Income Fund not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
