Cardinal Energy's (TSE:CJ) Dividend Will Be CA$0.06

Cardinal Energy Ltd. (TSE:CJ) has announced that it will pay a dividend of CA$0.06 per share on the 17th of November. This means the annual payment is 9.0% of the current stock price, which is above the average for the industry.

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Cardinal Energy's Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

EPS is set to fall by 3.8% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 135%, which is definitely a bit high to be sustainable going forward.

View our latest analysis for Cardinal Energy

Dividend Volatility

Although the company has a long dividend history, it has been cut 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. This works out to be a decline of approximately 1.5% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Could Be Constrained

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 32% per year over the past five years. Although earnings per share is up nicely Cardinal Energy is paying out 131% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

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. 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Cardinal Energy that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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