Tamarack Valley Energy (TSE:TVE) Has Affirmed Its Dividend Of CA$0.0127

Tamarack Valley Energy Ltd.'s (TSE:TVE) investors are due to receive a payment of CA$0.0127 per share on 15th of October. This means the annual payment will be 2.5% of the current stock price, which is lower than the industry average.

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Tamarack Valley Energy's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Tamarack Valley Energy's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 32.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Tamarack Valley Energy

Tamarack Valley Energy Doesn't Have A Long Payment History

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. Since 2021, the dividend has gone from CA$0.0996 total annually to CA$0.153. This means that it has been growing its distributions at 11% per annum over that time. Tamarack Valley Energy has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Tamarack Valley Energy has seen EPS rising for the last five years, at 32% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Tamarack Valley Energy's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

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. Taking the debate a bit further, we've identified 1 warning sign for Tamarack Valley Energy that investors need to be conscious of moving forward. Is Tamarack Valley Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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