Aecon Group Inc.'s (TSE:ARE) investors are due to receive a payment of CA$0.185 per share on 3rd of October. This makes the dividend yield 6.5%, which will augment investor returns quite nicely.
Aecon Group's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Aecon Group's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Looking forward, earnings per share is forecast to rise by 1.3% over the next year. If the dividend continues on this path, the payout ratio could be 67% by next year, which we think can be pretty sustainable going forward.
Aecon Group Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was CA$0.28, compared to the most recent full-year payment of CA$0.74. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Aecon Group has been growing its earnings per share at 15% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
Our Thoughts On Aecon Group's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Aecon Group'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 Aecon Group 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. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Aecon Group you should be aware of, and 1 of them doesn't sit too well with us. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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