Pine Cliff Energy (TSE:PNE) Has Affirmed Its Dividend Of CA$0.0108

The board of Pine Cliff Energy Ltd. (TSE:PNE) has announced that it will pay a dividend of CA$0.0108 per share on the 31st of August. This means the annual payment is 8.7% of the current stock price, which is above the average for the industry.

See our latest analysis for Pine Cliff Energy

Pine Cliff Energy Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Pine Cliff Energy's dividend made up quite a large proportion of earnings but only 59% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

EPS is set to fall by 63.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach over 200%, which could put the dividend in jeopardy if the company's earnings don't improve.

Pine Cliff Energy Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Pine Cliff Energy Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Pine Cliff Energy has grown earnings per share at 64% per year over the past five years. However, Pine Cliff Energy 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 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 don't think Pine Cliff Energy is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Pine Cliff Energy that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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