Can This Dividend Machine Keep Averaging 40% Payout Growth a Year?

Canadian telecommunications and media company Quebecor (OTC: QBCR.F) is connected a dividend blistery streak. Since aboriginal 2016, it's grown its quarterly payouts from 0.0175 Canadian dollars per stock to CA$0.35 today. This 1,900% maturation means that anyone who had invested CA$1,000 successful 2016 and held connected would beryllium collecting a 17% yearly output connected the archetypal investment.

These gains are, alas, successful the past. But determination are 3 reasons to deliberation that this CA$11.8 cardinal Montreal-based institution tin astatine slightest lucifer its erstwhile dividend maturation successful the adjacent 10 years, too. If I'm right, by 2036, this institution could beryllium paying a astir 55.7% output connected outgo to investors who bargain today. If it materializes, this income watercourse could beryllium life-changing.

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One speedy mode to gauge a company's quality to support increasing dividends is to analyse its payout ratio, oregon the percent of nett income it's already spending connected its dividend.

The little a payout ratio, the much breathing country absorption has to turn its dividend. A institution that's already spending 99% of nett income to wage its dividend, for instance, has a batch little country to maneuver than a institution that could treble its dividend overnight and inactive beryllium paying lone a tiny percent of nett income connected the dividend.

In Quebecor's case, the payout ratio has fallen implicit the past 4 years, arsenic currency travel from operating activities (CFO) began surging successful 2022 and precocious overtook it.

Rising CFO is large quality for income investors due to the fact that it's a measurement of currency generated from regular concern activities (not banal offerings, depreciations, oregon one-time windfalls). This shows that aft paying regular expenses (salaries, overhead, outgo of materials, etc.), the institution conscionable keeps raking successful much cash.

All told, this institution has grown its dividend by an mean of 40% a twelvemonth since 2016. If there's a wrinkle, it's that this maturation has slowed since 2020, with the dividend rising by 75% wide since then. However, this came arsenic absorption progressively turned to stock buybacks arsenic a mode to reward shareholders, with CA$179 cardinal spent repurchasing shares implicit the past 12 months.

That's astir arsenic overmuch arsenic the astir CA$216 cardinal that the institution paid retired successful dividends past year. By winding down buybacks, absorption tin astir treble its dividend without going into indebtedness oregon cutting investments elsewhere.