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It looks like Tamarack Valley Energy Ltd. (TSE:TVE) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Tamarack Valley Energy investors that purchase the stock on or after the 30th of December will not receive the dividend, which will be paid on the 15th of January.
The company's upcoming dividend is CA$0.01275 a share, following on from the last 12 months, when the company distributed a total of CA$0.15 per share to shareholders. Looking at the last 12 months of distributions, Tamarack Valley Energy has a trailing yield of approximately 3.4% on its current stock price of CA$4.54. 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! So we need to investigate whether Tamarack Valley Energy can afford its dividend, and if the dividend could grow.
See our latest analysis for Tamarack Valley Energy
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Tamarack Valley Energy paying out a modest 39% of its earnings. 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. Luckily it paid out just 21% of its free cash flow last year.
It's positive to see that Tamarack Valley Energy'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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Tamarack Valley Energy's earnings per share have been growing at 19% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.