Yahoo Finance Transcontinental (TSE:TCL.A) Is Paying Out A Dividend Of CA$0.225
The board of Transcontinental Inc. (TSE:TCL.A) has announced that it will pay a dividend of CA$0.225 per share on the 23rd of January. This makes the dividend yield 5.8%, which will augment investor returns quite nicely.
View our latest analysis for Transcontinental
Transcontinental's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, Transcontinental is earning enough to cover the payment, but then it makes up 97% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Looking forward, earnings per share is forecast to fall by 5.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 61%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Transcontinental Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from CA$0.58 total annually to CA$0.90. This means that it has been growing its distributions at 4.5% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Dividend Growth Is Doubtful
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Over the past five years, it looks as though Transcontinental's EPS has declined at around 9.8% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Transcontinental's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Transcontinental is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Transcontinental that investors should take into consideration. 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.
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