Tamarack Valley Energy (TSE:TVE) Will Pay 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 16th of September. Including this payment, the dividend yield on the stock will be 3.7%, which is a modest boost for shareholders' returns.

View our latest analysis for Tamarack Valley Energy

Tamarack Valley Energy's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Tamarack Valley Energy was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 4.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 61% by next year, which is in a pretty sustainable range.

Tamarack Valley Energy Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 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 means that it has been growing its distributions at 15% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Tamarack Valley Energy has only grown its earnings per share at 4.1% per annum over the past five years. The company has been growing at a pretty soft 4.1% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, a consistent dividend is a good thing, and we think that Tamarack Valley Energy has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 4 warning signs for Tamarack Valley Energy that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.