Petrus Resources (TSE:PRQ) Will 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 30th of December. This means the dividend yield will be fairly typical at 6.2%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Petrus Resources' stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Estimates Indicate Petrus Resources' Could Struggle to Maintain Dividend Payments In The Future

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, the company was paying out 2,501% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share could rise by 18.8% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 2,186%, which probably can't continue without starting to put some pressure on the balance sheet.

See our latest analysis for Petrus Resources

Petrus Resources Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The most recent annual payment of CA$0.12 is about the same as the annual payment 2 years ago. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

Petrus Resources' Dividend Might Lack Growth

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Petrus Resources has impressed us by growing EPS at 19% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Petrus Resources' Dividend Doesn't Look Sustainable

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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Petrus Resources has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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