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Pine Cliff Energy Ltd.'s (TSE:PNE) investors are due to receive a payment of CA$0.0108 per share on 29th of September. Based on this payment, the dividend yield on the company's stock will be 9.4%, which is an attractive boost to shareholder returns.
See our latest analysis for Pine Cliff Energy
Pine Cliff Energy Doesn't Earn Enough To Cover Its Payments
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Pine Cliff Energy was paying out 91% of earnings, but a comparatively small 59% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Over the next year, EPS is forecast to fall by 63.6%. If the dividend continues along the path it has been on recently, the company could be paying out more than double what it is earning, which is definitely a bit high to be sustainable going forward.
Pine Cliff Energy Is Still Building Its Track Record
The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
Pine Cliff Energy Might Find It Hard To Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Pine Cliff Energy has seen EPS rising for the last five years, at 64% per annum. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Pine Cliff Energy is not retaining those earnings to reinvest in growth.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Pine Cliff Energy that you should be aware of before investing. 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.