Westshore Terminals Investment's (TSE:WTE) Upcoming Dividend Will Be Larger Than Last Year's
Westshore Terminals Investment Corporation (TSE:WTE) will increase its dividend from last year's comparable payment on the 15th of April to CA$0.725. This will take the annual payment to 5.8% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for Westshore Terminals Investment
Westshore Terminals Investment 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. Prior to this announcement, Westshore Terminals Investment's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 96% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.
Over the next year, EPS is forecast to fall by 22.5%. If the dividend continues along recent trends, we estimate the payout ratio could reach 120%, which could put the dividend in jeopardy if the company's earnings don't improve.
Westshore Terminals Investment Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CA$1.32 in 2014, and the most recent fiscal year payment was CA$1.50. This implies that the company grew its distributions at a yearly rate of about 1.3% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Dividend Growth May Be Hard To Achieve
The company's investors will be pleased to have been receiving dividend income for some time. Westshore Terminals Investment hasn't seen much change in its earnings per share over the last five years. Westshore Terminals Investment's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.
The Dividend Could Prove To Be Unreliable
In summary, while it's always good to see the dividend being raised, we don't think Westshore Terminals Investment's payments are rock solid. 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 don't think Westshore Terminals Investment is a great stock to add to your portfolio if income is your focus.
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 2 warning signs for Westshore Terminals Investment (of which 1 is significant!) you should know about. Is Westshore Terminals Investment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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