Frontera Energy (TSE:FEC) Has Announced A Dividend Of $0.0625

Frontera Energy Corporation's (TSE:FEC) investors are due to receive a payment of $0.0625 per share on 16th of April. This payment means the dividend yield will be 3.6%, which is below the average for the industry.

Check out our latest analysis for Frontera Energy

Frontera Energy Might Find It Hard To Continue The Dividend

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Frontera Energy's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Assuming the trend of the last few years continues, EPS will grow by 25.9% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

Frontera Energy's Dividend Has Lacked Consistency

Looking back, Frontera Energy's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from $0.488 total annually to $0.172. This works out to a decline of approximately 65% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that Frontera Energy has grown earnings per share at 26% per 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 Really Like Frontera Energy's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income 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. For example, we've picked out 1 warning sign for Frontera Energy that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.