Tamarack Valley Energy (TSE:TVE) Is Paying Out A Dividend Of CA$0.0125

The board of Tamarack Valley Energy Ltd. (TSE:TVE) has announced that it will pay a dividend of CA$0.0125 per share on the 15th of November. Including this payment, the dividend yield on the stock will be 3.7%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Tamarack Valley Energy

Tamarack Valley Energy's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Tamarack Valley Energy was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 23%, which makes us pretty comfortable with the sustainability of the dividend.

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 2 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$0.15. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Tamarack Valley Energy has grown earnings per share at 39% per year over the past five years. 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 4 warning signs for Tamarack Valley Energy (of which 2 shouldn't be ignored!) you should know about. 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.