Whitecap Resources (TSE:WCP) Has Announced A Dividend Of CA$0.0608

Whitecap Resources Inc.'s (TSE:WCP) investors are due to receive a payment of CA$0.0608 per share on 15th of December. This payment means that the dividend yield will be 6.3%, which is around the industry average.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Whitecap Resources' Future Dividends May Potentially Be At Risk

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last dividend, Whitecap Resources is earning enough to cover the payment, but then it makes up 133% 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.

Looking forward, earnings per share is forecast to fall by 11.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 111%, which could put the dividend under pressure if earnings don't start to improve.

Check out our latest analysis for Whitecap Resources

Whitecap Resources Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. 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. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Whitecap Resources has grown earnings per share at 21% 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 107% 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.

Our Thoughts On Whitecap Resources' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Whitecap Resources (of which 1 is concerning!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.