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

The board of Whitecap Resources Inc. (TSE:WCP) has announced that it will pay a dividend on the 15th of September, with investors receiving CA$0.0608 per share. This means the annual payment is 7.4% of the current stock price, which is above the average for the industry.

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Estimates Indicate Whitecap Resources' Could Struggle to Maintain Dividend Payments In The Future

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Whitecap Resources' dividend was only 50% of earnings, however it was paying out 148% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to fall by 11.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 102%, which could put the dividend under pressure if earnings don't start to improve.

See our latest analysis for Whitecap Resources

Whitecap Resources Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was CA$0.75, compared to the most recent full-year payment of CA$0.73. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Whitecap Resources has grown earnings per share at 34% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Whitecap Resources could prove to be a strong dividend payer.

We should note that Whitecap Resources has issued stock equal to 104% of shares outstanding. 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.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Whitecap Resources' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 2 warning signs for Whitecap Resources (of which 1 makes us a bit uncomfortable!) you should know about. Is Whitecap Resources not quite the opportunity you were looking for? Why not check out our selection of top 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.