Pine Cliff Energy (TSE:PNE) Will Pay A 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 December, with investors receiving CA$0.005 per share. Based on this payment, the dividend yield on the company's stock will be 7.0%, which is an attractive boost to shareholder returns.

Check out 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. Despite not generating a profit, Pine Cliff Energy is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

If the trend of the last few years continues, EPS will grow by 40.3% over the next 12 months. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

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 2021, and the most recent fiscal year payment was 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 dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Pine Cliff Energy has impressed us by growing EPS at 40% per year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

Pine Cliff Energy's Dividend Doesn't Look Sustainable

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. 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 don't think Pine Cliff Energy is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Pine Cliff Energy (of which 1 is potentially serious!) you should know about. 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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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.