Petrus Resources (TSE:PRQ) Is Due To Pay A Dividend Of CA$0.01

The board of Petrus Resources Ltd. (TSE:PRQ) has announced that it will pay a dividend of CA$0.01 per share on the 29th of August. This makes the dividend yield 8.3%, which will augment investor returns quite nicely.

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Petrus Resources' Future Dividends May Potentially Be At Risk

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was higher than its profits, and made up 94% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Earnings per share could rise by 46.2% over the next year if things go the same way as they have for the last few years. If the dividend continues on its recent course, the payout ratio in 12 months could be 1,065%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Petrus Resources

Petrus Resources Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The most recent annual payment of CA$0.12 is about the same as the annual payment 2 years ago. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Petrus Resources 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 Petrus Resources has grown earnings per share at 46% per year over the past five years. EPS has been growing well, but Petrus Resources has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Petrus Resources' Dividend Doesn't Look Sustainable

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 be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Petrus Resources (of which 1 is concerning!) you should know about. Is Petrus Resources not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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