The board of The Keg Royalties Income Fund (TSE:KEG.UN) has announced that it will pay a dividend on the 30th of November, with investors receiving CA$0.0946 per share. Based on this payment, the dividend yield on the company's stock will be 8.3%, which is an attractive boost to shareholder returns.
Check out our latest analysis for Keg Royalties Income Fund
Keg Royalties Income Fund's Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Keg Royalties Income Fund's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, EPS could fall by 1.2% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 58%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Keg Royalties Income Fund 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$0.96, compared to the most recent full-year payment of CA$1.14. This implies that the company grew its distributions at a yearly rate of about 1.7% 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.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. However, Keg Royalties Income Fund's EPS was effectively flat over the past five years, which could stop the company from paying more every year.
In Summary
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs for Keg Royalties Income Fund that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.