North American Construction Group Ltd. (TSE:NOA) Passed Our Checks, And It's About To Pay A CA$0.10 Dividend
North American Construction Group Ltd. (TSE:NOA) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase North American Construction Group's shares on or after the 29th of November will not receive the dividend, which will be paid on the 5th of January.
The company's next dividend payment will be CA$0.10 per share, on the back of last year when the company paid a total of CA$0.40 to shareholders. Last year's total dividend payments show that North American Construction Group has a trailing yield of 1.5% on the current share price of CA$26.26. If you buy this business for its dividend, you should have an idea of whether North American Construction Group's dividend is reliable and sustainable. As a result, readers should always check whether North American Construction Group has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for North American Construction Group
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. North American Construction Group has a low and conservative payout ratio of just 14% of its income after tax. A useful secondary check can be to evaluate whether North American Construction Group generated enough free cash flow to afford its dividend. The good news is it paid out just 21% of its free cash flow in the last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see North American Construction Group has grown its earnings rapidly, up 68% a year for the past five years. North American Construction Group looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, North American Construction Group has lifted its dividend by approximately 17% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Has North American Construction Group got what it takes to maintain its dividend payments? North American Construction Group has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.
So while North American Construction Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that North American Construction Group is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
