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Pine Cliff Energy Ltd. (TSE:PNE) has announced that it will pay a dividend of CA$0.0013 per share on the 30th of April. This makes the dividend yield 9.8%, which will augment investor returns quite nicely.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Pine Cliff Energy's stock price has reduced by 34% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
Pine Cliff Energy's Distributions May Be Difficult To Sustain
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.
If the trend of the last few years continues, EPS will grow by 29.0% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.
View our latest analysis for Pine Cliff Energy
Pine Cliff Energy's Dividend Has Lacked Consistency
The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 3 years was CA$0.0996 in 2022, and the most recent fiscal year payment was CA$0.06. Dividend payments have fallen sharply, down 40% over that time. A company that decreases its dividend over time generally isn't what we are looking for.
The Company Could Face Some Challenges Growing The Dividend
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Pine Cliff Energy has seen EPS rising for the last five years, at 29% per annum. While the company hasn't yet recorded a profit, the growth rates are healthy. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.
Pine Cliff Energy's Dividend Doesn't Look Sustainable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pine Cliff Energy's payments, as there could be some issues with sustaining them into the future. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would be a touch cautious of relying on this stock primarily for the dividend income.