Cardinal Energy (TSE:CJ) Has Affirmed Its Dividend Of CA$0.06

The board of Cardinal Energy Ltd. (TSE:CJ) has announced that it will pay a dividend of CA$0.06 per share on the 15th of January. The dividend yield will be 8.2% based on this payment which is still above the industry average.

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Estimates Indicate Cardinal Energy's Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Cardinal Energy was paying out 150% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Earnings per share is forecast to rise by 14.2% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 132%, which is a bit high and could start applying pressure to the balance sheet.

Check out our latest analysis for Cardinal Energy

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of CA$0.84 in 2015 to the most recent total annual payment of CA$0.72. The dividend has shrunk at around 1.5% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Cardinal Energy Might Find It Hard To Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Cardinal Energy has impressed us by growing EPS at 17% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Cardinal Energy's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Cardinal Energy's payments, as there could be some issues with sustaining them into the future. Strong earnings growth means Cardinal Energy has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Cardinal Energy has 2 warning signs (and 1 which can't be ignored) we think you should know about. Is Cardinal Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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