High Arctic Energy Services (TSE:HWO) Has Announced A Dividend Of CA$0.005

High Arctic Energy Services Inc (TSE:HWO) has announced that it will pay a dividend of CA$0.005 per share on the 14th of August. The dividend yield will be 4.8% based on this payment which is still above the industry average.

See our latest analysis for High Arctic Energy Services

High Arctic Energy Services' Distributions May Be Difficult To Sustain

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though High Arctic Energy Services isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS might fall by 56.1% based on recent performance. 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.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from CA$0.12 total annually to CA$0.06. Doing the maths, this is a decline of about 6.7% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. High Arctic Energy Services' EPS has fallen by approximately 56% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

High Arctic Energy Services' 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 High Arctic Energy Services' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for High Arctic Energy Services you should be aware of, and 1 of them doesn't sit too well with us. Is High Arctic Energy Services not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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