Why You Might Be Interested In Whitecap Resources Inc. (TSE:WCP) For Its Upcoming Dividend

Whitecap Resources Inc. (TSE:WCP) stock is about to trade ex-dividend in 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Whitecap Resources' shares before the 29th of November to receive the dividend, which will be paid on the 16th of December.

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. Looking at the last 12 months of distributions, Whitecap Resources has a trailing yield of approximately 6.8% on its current stock price of CA$10.72. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Whitecap Resources

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Whitecap Resources's payout ratio is modest, at just 49% of profit. 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. Dividends consumed 53% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Whitecap Resources's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Whitecap Resources has grown its earnings rapidly, up 57% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Whitecap Resources has increased its dividend at approximately 0.7% a year on average. 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.

To Sum It Up

Has Whitecap Resources got what it takes to maintain its dividend payments? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Whitecap Resources looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

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 1 warning sign we think you should be aware of.

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.