Cardinal Energy (TSE:CJ) Has Announced A Dividend Of CA$0.06

Cardinal Energy Ltd. (TSE:CJ) will pay a dividend of CA$0.06 on the 15th of August. This means the annual payment is 10.0% of the current stock price, which is above the average for the industry.

See our latest analysis for Cardinal Energy

Cardinal Energy Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Cardinal Energy's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 95.9% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach over 200%, which could put the dividend in jeopardy if the company's earnings don't improve.

Cardinal Energy's Dividend Has Lacked Consistency

It's comforting to see that Cardinal Energy has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was CA$0.65 in 2014, and the most recent fiscal year payment was CA$0.72. This works out to be a compound annual growth rate (CAGR) of approximately 1.1% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Cardinal Energy has been growing its earnings per share at 37% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Cardinal Energy Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Cardinal Energy that you should be aware of before investing. 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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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.