Only Four Days Left To Cash In On Pine Cliff Energy's (TSE:PNE) Dividend

Pine Cliff Energy Ltd. (TSE:PNE) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Pine Cliff Energy investors that purchase the stock on or after the 14th of November will not receive the dividend, which will be paid on the 30th of November.

The company's upcoming dividend is CA$0.011 a share, following on from the last 12 months, when the company distributed a total of CA$0.13 per share to shareholders. Last year's total dividend payments show that Pine Cliff Energy has a trailing yield of 8.4% on the current share price of CA$1.54. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Pine Cliff Energy can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Pine Cliff Energy

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Pine Cliff Energy paid out 91% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.

It's good to see that while Pine Cliff Energy's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

Click here to see how much of its profit Pine Cliff Energy paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Pine Cliff Energy has grown its earnings rapidly, up 64% a year for the past five years.

Unfortunately Pine Cliff Energy has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Has Pine Cliff Energy got what it takes to maintain its dividend payments? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Pine Cliff Energy's dividend merits.

If you're not too concerned about Pine Cliff Energy's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To help with this, we've discovered 2 warning signs for Pine Cliff Energy that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking 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.