The board of Yellow Pages Limited (TSE:Y) has announced that it will pay a dividend of CA$0.15 per share on the 15th of June. Based on this payment, the dividend yield on the company’s stock will be 4.3%, which is an attractive boost to shareholder returns.
See our latest analysis for Yellow Pages
Yellow Pages’ Earnings Easily Cover the Distributions
Impressive dividend yields are good, but this doesn’t matter much if the payments can’t be sustained. However, Yellow Pages’ earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 64.0% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.
Yellow Pages Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from CA$0.44 in 2020 to the most recent annual payment of CA$0.60. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Yellow Pages has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Yellow Pages has impressed us by growing EPS at 64% 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.
We Really Like Yellow Pages’ Dividend
In summary, it is good to see that the dividend is staying consistent, and we don’t think there is any reason to suspect this might change over the medium term. 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.
It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we’ve picked out 1 warning sign for Yellow Pages 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.