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It looks like Tourmaline Oil Corp. (TSE:TOU) is about to go ex-dividend in the next two days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. Therefore, if you purchase Tourmaline Oil's shares on or after the 15th of November, you won't be eligible to receive the dividend, when it is paid on the 26th of November.
The company's next dividend payment will be CA$0.50 per share, on the back of last year when the company paid a total of CA$3.90 to shareholders. Calculating the last year's worth of payments shows that Tourmaline Oil has a trailing yield of 6.1% on the current share price of CA$63.88. 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! As a result, readers should always check whether Tourmaline Oil has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Tourmaline Oil
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tourmaline Oil paid out a comfortable 28% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Tourmaline Oil'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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Tourmaline Oil has grown its earnings rapidly, up 23% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.