Assessing the Sustainability of Transcontinental Inc's Upcoming Dividend
Transcontinental Inc (TCLAF, Financial) recently announced a dividend of $0.23 per share, payable on 2024-01-22, with the ex-dividend date set for 2024-01-05. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Transcontinental Inc's dividend performance and assess its sustainability.
What Does Transcontinental Inc Do?
Transcontinental Inc, also known as TC Transcontinental, is a Canadian printer and flexible packaging provider that operates in three segments: packaging, printing, and other. Its packaging segment features the production of different plastic products geared toward consumer goods. Production plants specialize in extrusion, lamination, printing, and converting. The company offers premedia, printing, and distribution services through the printing segment. Publishers, retailers, cataloguers, and marketers are some of the customers who tap TC Transcontinental for these printing solutions. The smaller other segment focuses on the media sector, which generates revenue from print and digital publishing products.
A Glimpse at Transcontinental Inc's Dividend History
Transcontinental Inc has maintained a consistent dividend payment record since 2004, with dividends currently distributed on a quarterly basis. The company has also increased its dividend each year since 2004, earning it the status of a dividend achiever, a title given to companies that have increased their dividend annually for at least the past 20 years. Below is a chart showing the annual Dividends Per Share to track historical trends.
Breaking Down Transcontinental Inc's Dividend Yield and Growth
As of today, Transcontinental Inc's 12-month trailing dividend yield stands at 6.47%, with a forward dividend yield of 6.39%. This suggests an expectation of decreased dividend payments over the next 12 months. Over the past three years, the company's annual dividend growth rate was a modest 0.20%, but over a five-year horizon, this rate increased to 1.50% per year. Looking at the past decade, Transcontinental Inc's annual dividends per share growth rate is 4.70%. Based on the current dividend yield and five-year growth rate, the 5-year yield on cost for Transcontinental Inc stock is approximately 6.97%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. Transcontinental Inc's dividend payout ratio as of October 31, 2023, is 0.91, which may raise concerns about the sustainability of the company's dividend. Additionally, Transcontinental Inc's profitability rank, which stands at 7 out of 10, suggests good profitability prospects. The company has also reported positive net income each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
For dividends to be sustainable, a company must exhibit robust growth metrics. Transcontinental Inc's growth rank of 7 out of 10 indicates a good growth trajectory relative to its competitors. However, the company's revenue per share and 3-year revenue growth rate, which has increased by approximately 4.70% per year on average, underperforms approximately 62.3% of global competitors. The 3-year EPS growth rate shows a decrease of about -6.80% per year on average, underperforming approximately 73.1% of global competitors. Lastly, the 5-year EBITDA growth rate of -9.20% underperforms approximately 85.91% of global competitors.
Next Steps
In conclusion, while Transcontinental Inc's consistent dividend history and status as a dividend achiever are commendable, the sustainability of its dividend payments requires careful evaluation. The modest dividend growth rate, high payout ratio, and mixed profitability and growth metrics present a nuanced picture for value investors. With the company's next dividend payment approaching, investors should consider these factors alongside their investment strategy. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener to find opportunities that align with their portfolio objectives.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
