Yahoo Finance ARC Resources Ltd. (TSE:ARX) Passed Our Checks, And It's About To Pay A CA$0.17 Dividend
ARC Resources Ltd. (TSE:ARX) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase ARC Resources' shares before the 28th of June to receive the dividend, which will be paid on the 15th of July.
The company's upcoming dividend is CA$0.17 a share, following on from the last 12 months, when the company distributed a total of CA$0.68 per share to shareholders. Last year's total dividend payments show that ARC Resources has a trailing yield of 2.9% on the current share price of CA$23.86. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for ARC Resources
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. That's why it's good to see ARC Resources paying out a modest 34% of its earnings. A useful secondary check can be to evaluate whether ARC Resources generated enough free cash flow to afford its dividend. Dividends consumed 63% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that ARC Resources's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see ARC Resources's earnings have been skyrocketing, up 27% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. ARC Resources has seen its dividend decline 5.5% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
To Sum It Up
Is ARC Resources worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about ARC Resources, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks ARC Resources is facing. Case in point: We've spotted 3 warning signs for ARC Resources you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
