Three Days Left Until Whitecap Resources Inc. (TSE:WCP) Trades Ex-Dividend

Whitecap Resources Inc. (TSE:WCP) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Whitecap Resources' shares on or after the 30th of August will not receive the dividend, which will be paid on the 15th of September.

The company's next dividend payment will be CA$0.016 per share. Last year, in total, the company distributed CA$0.18 to shareholders. Last year's total dividend payments show that Whitecap Resources has a trailing yield of 3.4% on the current share price of CA$5.27. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Whitecap Resources

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Whitecap Resources is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 19% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Whitecap Resources's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Whitecap Resources's earnings per share have plummeted approximately 43% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Whitecap Resources's dividend payments per share have declined at 13% per year on average over the past nine years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Is Whitecap Resources an attractive dividend stock, or better left on the shelf? Whitecap Resources has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, Whitecap Resources looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Whitecap Resources for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Whitecap Resources (1 is a bit unpleasant!) that deserve your attention before investing in the shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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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.
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