Tamarack Valley Energy (TSE:TVE) Is Due To Pay A 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 August. The dividend yield is 3.1% based on this payment, which is a little bit low compared to the other companies in the industry.

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

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Tamarack Valley Energy was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 11.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Tamarack Valley Energy

Tamarack Valley Energy Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2021, the dividend has gone from CA$0.0996 total annually to CA$0.153. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year 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. We are encouraged to see that Tamarack Valley Energy has grown earnings per share at 39% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Tamarack Valley Energy Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Tamarack Valley Energy might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. 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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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.