Crescent Point Energy (TSE:CPG) Has Announced That It Will Be Increasing Its Dividend To CA$0.115

Crescent Point Energy Corp. (TSE:CPG) will increase its dividend from last year's comparable payment on the 1st of April to CA$0.115. This takes the annual payment to 5.6% of the current stock price, which is about average for the industry.

Check out our latest analysis for Crescent Point Energy

Crescent Point Energy's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Crescent Point Energy's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 10.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 28%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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$2.76 in 2014 to the most recent total annual payment of CA$0.567. Dividend payments have fallen sharply, down 79% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Crescent Point Energy has been growing its earnings per share at 52% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We should note that Crescent Point Energy has issued stock equal to 13% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Crescent Point Energy Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Crescent Point Energy has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Crescent Point Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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