Whitecap Resources (TSE:WCP) Has Affirmed Its Dividend Of CA$0.0608

Whitecap Resources Inc. (TSE:WCP) will pay a dividend of CA$0.0608 on the 15th of August. This means the annual payment is 7.2% of the current stock price, which is above the average for the industry.

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Whitecap Resources' Projections Indicate Future Payments May Be Unsustainable

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment was quite easily covered by earnings, but it made up 140% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

EPS is set to fall by 15.8% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 115%, which could put the dividend in jeopardy if the company's earnings don't improve.

View our latest analysis for Whitecap Resources

Whitecap Resources Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CA$0.75 in 2015, and the most recent fiscal year payment was CA$0.73. The dividend has shrunk at a rate of less than 1% a year over this period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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. Whitecap Resources has seen EPS rising for the last five years, at 43% per annum. Whitecap Resources is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

An additional note is that the company has been raising capital by issuing stock equal to 106% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Our Thoughts On Whitecap Resources' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Whitecap Resources is earning enough to cover the payments, the cash flows are lacking. We don't think Whitecap Resources is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 3 warning signs for Whitecap Resources (of which 1 is potentially serious!) 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.