Pine Cliff Energy (TSE:PNE) Has Announced A Dividend Of CA$0.005

Pine Cliff Energy Ltd.'s (TSE:PNE) investors are due to receive a payment of CA$0.005 per share on 31st of January. This payment means that the dividend yield will be 6.4%, which is around the industry average.

See our latest analysis for Pine Cliff Energy

Pine Cliff Energy Might Find It Hard To Continue The Dividend

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Despite not generating a profit, Pine Cliff Energy is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

If the trend of the last few years continues, EPS will grow by 40.3% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

Pine Cliff Energy's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of CA$0.0996 in 2022 to the most recent total annual payment of CA$0.06. Dividend payments have fallen sharply, down 40% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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. We are encouraged to see that Pine Cliff Energy has grown earnings per share at 40% per year over the past five years. The company hasn't been turning a profit, but it running in the right direction. 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, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Pine Cliff Energy that you should be aware of before investing. 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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