Whitecap Resources Inc. (TSE:WCP) Stock Goes Ex-Dividend In Just Four Days

It looks like Whitecap Resources Inc. (TSE:WCP) is about to go 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 important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Whitecap Resources' shares on or after the 29th of August, you won't be eligible to receive the dividend, when it is paid on the 15th of September.

The company's next dividend payment will be CA$0.0608 per share, and in the last 12 months, the company paid a total of CA$0.73 per share. Looking at the last 12 months of distributions, Whitecap Resources has a trailing yield of approximately 7.2% on its current stock price of CA$10.20. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Whitecap Resources has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Whitecap Resources paid out 50% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Whitecap Resources generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (85%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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.

Check out our latest analysis for Whitecap Resources

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Whitecap Resources's earnings have been skyrocketing, up 34% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Whitecap Resources's dividend payments are effectively flat on where they were 10 years ago.

To Sum It Up

Is Whitecap Resources an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Whitecap Resources is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. 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 instance, we've identified 2 warning signs for Whitecap Resources (1 is significant) you should be aware of.

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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.