Teck Resources Limited (TSE:TECK.B) will pay a dividend of CA$0.125 on the 30th of June. The dividend yield is 1.0% based on this payment, which is a little bit low compared to the other companies in the industry.

We check all companies for important risks. See what we found for Teck Resources in our free report.

Teck Resources' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Teck Resources' Could Struggle to Maintain Dividend Payments In The Future

Teck Resources' Future Dividends May Potentially Be At Risk

If it is predictable over a long period, even low dividend yields can be attractive. Despite not generating a profit, Teck Resources is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

The next 12 months is set to see EPS grow by 141.1%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

Check out our latest analysis for Teck Resources

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from CA$0.90 total annually to CA$0.50. Doing the maths, this is a decline of about 5.7% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Company Could Face Some Challenges Growing The Dividend

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Teck Resources has impressed us by growing EPS at 13% per year over the past five years. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think Teck Resources is a great stock to add to your portfolio if income is your focus.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 18 Teck Resources analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Teck Resources not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.