Acadian Timber (TSE:ADN) Will Pay A Dividend Of CA$0.29
Acadian Timber Corp. (TSE:ADN) has announced that it will pay a dividend of CA$0.29 per share on the 15th of April. This means the annual payment is 6.1% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Acadian Timber
Acadian Timber Is Paying Out More Than It Is Earning
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
EPS is set to fall by 2.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 111%, which could put the dividend in jeopardy if the company's earnings don't improve.
Acadian Timber Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was CA$0.82, compared to the most recent full-year payment of CA$1.16. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Acadian Timber has only grown its earnings per share at 3.1% per annum over the past five years. The earnings growth is anaemic, and the company is paying out 104% of its profit. This gives limited room for the company to raise the dividend in the future.
Acadian Timber's 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 Acadian Timber's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Acadian Timber (of which 2 make us uncomfortable!) you should know about. Is Acadian Timber not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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