Pine Cliff Energy (TSE:PNE) Has Affirmed Its Dividend Of CA$0.0013

Pine Cliff Energy Ltd. (TSE:PNE) will pay a dividend of CA$0.0013 on the 31st of July. This payment means the dividend yield will be 2.3%, which is below the average for the industry.

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Pine Cliff Energy Might Find It Hard To Continue The Dividend

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even though Pine Cliff Energy isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS could expand by 18.2% if recent trends continue. It's nice to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

See our latest analysis for Pine Cliff Energy

Pine Cliff Energy's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The annual payment during the last 3 years was CA$0.0996 in 2022, and the most recent fiscal year payment was CA$0.015. This works out to a decline of approximately 85% 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.

The Company Could Face Some Challenges Growing The Dividend

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Pine Cliff Energy has seen EPS rising for the last five years, at 18% per annum. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

Our Thoughts On Pine Cliff Energy'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. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Pine Cliff Energy that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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