The board of Pine Cliff Energy Ltd. (TSE:PNE) has announced that it will pay a dividend on the 29th of September, with investors receiving CA$0.0108 per share. The dividend yield will be 9.4% based on this payment which is still above the industry average.
View 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. The last payment made up 91% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
Looking forward, earnings per share is forecast to fall by 63.6% over the next year. 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 Is Still Building Its Track Record
The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. 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.
Dividend Growth Could Be Constrained
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Pine Cliff Energy has grown earnings per share at 64% per year over the past five years. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pine Cliff Energy's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.
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. As an example, we've identified 2 warning signs for Pine Cliff Energy that you should be aware of before investing. 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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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.
About TSX:PNE
Pine Cliff Energy
Engages in the acquisition, exploration, development, and production of natural gas and crude oil in the Western Canadian Sedimentary Basin.
Undervalued unattractive dividend payer.
