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Pine Cliff Energy Ltd. (TSE:PNE) has announced that it will pay a dividend of CA$0.005 per share on the 31st of December. The dividend yield will be 7.0% based on this payment which is still above the industry average.
Check out our latest analysis for Pine Cliff Energy
Pine Cliff Energy Might Find It Hard To Continue The Dividend
If the payments aren't sustainable, a high yield for a few years won't matter that much. Despite not generating a profit, Pine Cliff Energy is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.
Over the next year, EPS could expand by 40.3% if recent trends continue. This is the right direction to be moving, but it is probably not enough to achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.
Pine Cliff Energy's Dividend Has Lacked Consistency
Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2021, the annual payment back then was CA$0.0996, compared to the most recent full-year payment of CA$0.06. Dividend payments have fallen sharply, down 40% over that time. 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 Company Could Face Some Challenges Growing The Dividend
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Pine Cliff Energy has seen EPS rising for the last five years, at 40% per annum. The company hasn't been turning a profit, but it running in the right direction. 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
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Strong earnings growth means Pine Cliff Energy has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Pine Cliff Energy you should be aware of, and 1 of them shouldn't be ignored. If you are a dividend investor, you might also want to look at our curated 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.