Whitecap Resources Inc. (TSE:WCP) Passed Our Checks, And It's About To Pay A CA$0.0608 Dividend

It looks like Whitecap Resources Inc. (TSE:WCP) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Meaning, you will need to purchase Whitecap Resources' shares before the 29th of April to receive the dividend, which will be paid on the 15th of May.

The company's next dividend payment will be CA$0.0608 per share. Last year, in total, the company distributed CA$0.73 to shareholders. Based on the last year's worth of payments, Whitecap Resources has a trailing yield of 6.9% on the current stock price of CA$10.65. If you buy this business for its dividend, you should have an idea of whether Whitecap Resources's dividend is reliable and sustainable. As a result, readers should always check whether Whitecap Resources has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Whitecap Resources

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Whitecap Resources paying out a modest 41% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 47% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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. It's encouraging to see Whitecap Resources has grown its earnings rapidly, up 57% a year for the past five years. Whitecap Resources is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Whitecap Resources has delivered 2.0% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Whitecap Resources is keeping back more of its profits to grow the business.

Final Takeaway

Is Whitecap Resources worth buying for its dividend? Whitecap Resources has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Whitecap Resources for the dividends alone, you should always be mindful of the risks involved. For example, Whitecap Resources has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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.