Vermilion Energy Inc. (TSE:VET) Is About To Go Ex-Dividend, And It Pays A 3.7% Yield

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Vermilion Energy Inc. (TSE:VET) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Vermilion Energy's shares on or after the 31st of December will not receive the dividend, which will be paid on the 15th of January.

The company's next dividend payment will be CA$0.12 per share, and in the last 12 months, the company paid a total of CA$0.48 per share. Based on the last year's worth of payments, Vermilion Energy has a trailing yield of 3.7% on the current stock price of CA$13.13. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Vermilion Energy can afford its dividend, and if the dividend could grow.

View our latest analysis for Vermilion Energy

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Vermilion Energy paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Luckily it paid out just 14% of its free cash flow last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Vermilion Energy reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Vermilion Energy has seen its dividend decline 15% per annum on average over the past 10 years, which is not great to see.

We update our analysis on Vermilion Energy every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Should investors buy Vermilion Energy for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." To summarise, Vermilion Energy looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Vermilion Energy is facing. To help with this, we've discovered 1 warning sign for Vermilion Energy that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.