Only Three Days Left To Cash In On Westshore Terminals Investment’s (TSE:WTE) Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Westshore Terminals Investment Corporation (TSE:WTE) is about to trade ex-dividend in the next 3 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 Westshore Terminals Investment’s shares before the 27th of March to receive the dividend, which will be paid on the 15th of April.

The company’s upcoming dividend is CA$0.725 a share, following on from the last 12 months, when the company distributed a total of CA$1.40 per share to shareholders. Calculating the last year’s worth of payments shows that Westshore Terminals Investment has a trailing yield of 5.7% on the current share price of CA$26.18. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! As a result, readers should always check whether Westshore Terminals Investment has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Westshore Terminals Investment

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 75% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year, it paid out more than three-quarters (86%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren’t growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we’re not enthused to see that Westshore Terminals Investment’s earnings per share have remained effectively flat over the past five years. It’s better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. A high payout ratio of 75% generally happens when a company can’t find better uses for the cash. Combined with slim earnings growth in the past few years, Westshore Terminals Investment could be signalling that its future growth prospects are thin.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Westshore Terminals Investment has delivered 1.3% dividend growth per year on average over the past 10 years.

To Sum It Up

Is Westshore Terminals Investment an attractive dividend stock, or better left on the shelf? Westshore Terminals Investment has struggled to grow its earnings per share, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don’t appear unsustainable. Overall we’re not hugely bearish on the stock, but there are likely better dividend investments out there.

So if you want to do more digging on Westshore Terminals Investment, you’ll find it worthwhile knowing the risks that this stock faces. To help with this, we’ve discovered 2 warning signs for Westshore Terminals Investment (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.

Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s a curated list of interesting stocks that are 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.