InPlay Oil (TSE:IPO) Is Paying Out A Dividend Of CA$0.015

InPlay Oil Corp. (TSE:IPO) has announced that it will pay a dividend of CA$0.015 per share on the 30th of September. The dividend yield will be 8.6% based on this payment which is still above the industry average.

Check out our latest analysis for InPlay Oil

Estimates Indicate InPlay Oil's Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment was quite easily covered by earnings, but it made up 101% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share is forecast to fall by 48.3% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 120%, which is definitely a bit high to be sustainable going forward.

InPlay Oil Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The payments haven't really changed that much since 2 years ago. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. InPlay Oil has impressed us by growing EPS at 43% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that InPlay Oil could prove to be a strong dividend payer.

Our Thoughts On InPlay Oil's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for InPlay Oil you should be aware of, and 1 of them makes us a bit uncomfortable. Is InPlay Oil 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.