Peyto Exploration & Development (TSE:PEY) Will Pay A Dividend Of CA$0.11

Peyto Exploration & Development Corp.'s (TSE:PEY) investors are due to receive a payment of CA$0.11 per share on 15th of January. This payment means that the dividend yield will be 6.1%, which is around the industry average.

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Peyto Exploration & Development's Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Peyto Exploration & Development was paying out 71% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Over the next year, EPS is forecast to expand by 56.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Peyto Exploration & Development

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The most recent annual payment of CA$1.32 is about the same as the annual payment 10 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Peyto Exploration & Development has been growing its earnings per share at 23% a year over the past five years. However, Peyto Exploration & Development isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Our Thoughts On Peyto Exploration & Development's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Peyto Exploration & Development's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Peyto Exploration & Development has been making. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Peyto Exploration & Development that you should be aware of before investing. Is Peyto Exploration & Development 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.