AltaGas (TSE:ALA) Is Paying Out A Larger Dividend Than Last Year

AltaGas Ltd. (TSE:ALA) will increase its dividend from last year's comparable payment on the 31st of March to CA$0.334. Despite this raise, the dividend yield of 3.2% is only a modest boost to shareholder returns.

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AltaGas' Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last dividend, AltaGas is earning enough to cover the payment, but then it makes up 10,423% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next year is set to see EPS grow by 3.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.

View our latest analysis for AltaGas

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of CA$1.77 in 2016 to the most recent total annual payment of CA$1.34. This works out to be a decline of approximately 2.8% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that AltaGas has grown earnings per share at 15% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On AltaGas' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While AltaGas is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 2 warning signs for AltaGas (of which 1 shouldn't be ignored!) you should know about. Is AltaGas not quite the opportunity you were looking for? Why not check out our selection of top 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.