Algoma Central (TSE:ALC) Is Paying Out A Larger Dividend Than Last Year
Algoma Central Corporation (TSE:ALC) will increase its dividend from last year's comparable payment on the 1st of March to CA$0.18. This takes the annual payment to 4.4% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for Algoma Central
Algoma Central's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. However, Algoma Central's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 26.5% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 69% by next year, which is in a pretty sustainable range.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from CA$0.20 total annually to CA$0.72. This means that it has been growing its distributions at 14% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Algoma Central has grown earnings per share at 27% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Algoma Central Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Algoma Central is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Algoma Central that investors should know about before committing capital to this stock. 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.
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