Yahoo Finance Vecima Networks (TSE:VCM) Has Announced A Dividend Of CA$0.055
Vecima Networks Inc. (TSE:VCM) will pay a dividend of CA$0.055 on the 18th of March. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.
View our latest analysis for Vecima Networks
Vecima Networks' Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Vecima Networks was paying only paying out a fraction of earnings, but the payment was a massive 1,039% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
The next year is set to see EPS grow by 63.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.
Vecima Networks Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of CA$0.18 in 2015 to the most recent total annual payment of CA$0.22. This means that it has been growing its distributions at 2.3% per annum over that time. Vecima Networks hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Vecima Networks has been growing its earnings per share at 41% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Vecima Networks 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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