Exco Technologies (TSE:XTC) Has Announced A Dividend Of CA$0.105
The board of Exco Technologies Limited (TSE:XTC) has announced that it will pay a dividend on the 28th of March, with investors receiving CA$0.105 per share. This makes the dividend yield 5.8%, which will augment investor returns quite nicely.
See our latest analysis for Exco Technologies
Exco Technologies' Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Exco Technologies was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.
EPS is set to fall by 4.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 68%, which is definitely feasible to continue.
Exco Technologies Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was CA$0.18 in 2014, and the most recent fiscal year payment was CA$0.42. This works out to be a compound annual growth rate (CAGR) of approximately 8.8% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. In the last five years, Exco Technologies' earnings per share has shrunk at approximately 4.4% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
Our Thoughts On Exco Technologies' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. 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. Just as an example, we've come across 3 warning signs for Exco Technologies you should be aware of, and 1 of them makes us a bit uncomfortable. 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.
