Pine Cliff Energy (TSE:PNE) Has Affirmed Its Dividend Of CA$0.005

The board of Pine Cliff Energy Ltd. (TSE:PNE) has announced that it will pay a dividend on the 31st of March, with investors receiving CA$0.005 per share. This means the annual payment is 7.7% of the current stock price, which is above the average for the industry.

See our latest analysis for Pine Cliff Energy

Pine Cliff Energy's Distributions May Be Difficult To Sustain

If the payments aren't sustainable, a high yield for a few years won't matter that much. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This is quite a strong warning sign that the dividend may not be sustainable.

Over the next year, EPS could expand by 29.0% if recent trends continue. This is the right direction to be moving, but it is probably not enough to achieve profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

Pine Cliff Energy's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2022, the dividend has gone from CA$0.0996 total annually to CA$0.06. The dividend has fallen 40% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Company Could Face Some Challenges Growing The Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Pine Cliff Energy has been growing its earnings per share at 29% a year over the past five years. While the company is not yet turning a profit, it is growing at a good rate. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Pine Cliff Energy that investors should know about before committing capital to this stock. Is Pine Cliff Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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