Tamarack Valley Energy's (TSE:TVE) Dividend Will Be CA$0.0125

The board of Tamarack Valley Energy Ltd. (TSE:TVE) has announced that it will pay a dividend on the 15th of September, with investors receiving CA$0.0125 per share. Based on this payment, the dividend yield will be 4.4%, which is fairly typical for the industry.

Check out our latest analysis for Tamarack Valley Energy

Tamarack Valley Energy's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Tamarack Valley Energy is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 155.7% over the next year. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

Tamarack Valley Energy Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the dividend has gone from CA$0.0996 total annually to CA$0.15. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. 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 who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Tamarack Valley Energy has been growing its earnings per share at 36% a 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.

We should note that Tamarack Valley Energy has issued stock equal to 27% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Tamarack Valley Energy's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tamarack Valley Energy's payments, as there could be some issues with sustaining them into the future. While Tamarack Valley Energy is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 5 warning signs for Tamarack Valley Energy (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.