Three Days Left Until Strathcona Resources Ltd. (TSE:SCR) Trades Ex-Dividend

It looks like Strathcona Resources Ltd. (TSE:SCR) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Strathcona Resources' shares before the 12th of September in order to receive the dividend, which the company will pay on the 22nd of September.

The company's next dividend payment will be CA$0.30 per share. Last year, in total, the company distributed CA$1.20 to shareholders. Based on the last year's worth of payments, Strathcona Resources stock has a trailing yield of around 3.1% on the current share price of CA$38.42. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Strathcona Resources has been able to grow its dividends, or if the dividend might be cut.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Strathcona Resources's payout ratio is modest, at just 35% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for Strathcona Resources

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. From this perspective, we're disturbed to see earnings per share plunged 32% over the last 12 months, and we'd wonder if the company has had some kind of major event that has skewed the calculation.

Unfortunately Strathcona Resources has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Is Strathcona Resources worth buying for its dividend? Earnings per share have fallen significantly, although at least Strathcona Resources paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Strathcona Resources's dividend merits.

If you want to look further into Strathcona Resources, it's worth knowing the risks this business faces. Case in point: We've spotted 1 warning sign for Strathcona Resources you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.