Frontera Energy (TSE:FEC) Is Due To Pay A Dividend Of $0.0625

Frontera Energy Corporation (TSE:FEC) will pay a dividend of $0.0625 on the 19th of January. This payment means the dividend yield will be 3.9%, which is below the average for the industry.

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Frontera Energy Might Find It Hard To Continue The Dividend

If it is predictable over a long period, even low dividend yields can be attractive. Even though Frontera Energy isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

EPS has fallen by an average of 8.3% in the past, so this could continue over the next year. This means that the company won't turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.

View our latest analysis for Frontera Energy

Frontera Energy's Dividend Has Lacked Consistency

It's comforting to see that Frontera Energy has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of $0.488 in 2018 to the most recent total annual payment of $0.177. This works out to a decline of approximately 64% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Come By

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. It's not great to see that Frontera Energy's earnings per share has fallen at approximately 8.3% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Frontera 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 Frontera Energy's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Frontera Energy (of which 1 is a bit concerning!) you should know about. Is Frontera 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.