Tecsys (TSE:TCS) Will Pay A Dividend Of CA$0.08

Tecsys Inc. (TSE:TCS) has announced that it will pay a dividend of CA$0.08 per share on the 2nd of August. This means the annual payment is 0.9% of the current stock price, which is above the average for the industry.

View our latest analysis for Tecsys

Tecsys Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 247% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

The next 12 months is set to see EPS grow by 69.0%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 168% over the next year.

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Tecsys 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$0.07 in 2014 to the most recent total annual payment of CA$0.32. This means that it has been growing its distributions at 16% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Tecsys has been growing its earnings per share at 9.6% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Tecsys' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tecsys' payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Tecsys 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Tecsys that investors should know about before committing capital to this stock. 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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