Tamarack Valley Energy (TSE:TVE) Is Due To Pay A Dividend Of CA$0.0125

Tamarack Valley Energy Ltd. (TSE:TVE) will pay a dividend of CA$0.0125 on the 15th of February. This means the dividend yield will be fairly typical at 5.1%.

View our latest analysis for Tamarack Valley Energy

Tamarack Valley Energy's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Tamarack Valley Energy was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.

The next year is set to see EPS grow by 103.2%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 47% which would be quite comfortable going to take the dividend forward.

Tamarack Valley Energy Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 2 years was CA$0.0996 in 2022, and the most recent fiscal year payment was CA$0.15. This means that it has been growing its distributions at 23% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Tamarack Valley Energy Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Tamarack Valley Energy has been growing its earnings per share at 39% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Tamarack Valley Energy is not retaining those earnings to reinvest in growth.

Tamarack Valley Energy's 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Tamarack Valley Energy (of which 3 are a bit unpleasant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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