Whitecap Resources Inc. (TSE:WCP) will pay a dividend of CA$0.0608 on the 17th of March. Based on this payment, the dividend yield on the company's stock will be 7.4%, which is an attractive boost to shareholder returns.
Check out our latest analysis for Whitecap Resources
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Whitecap Resources was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
EPS is set to fall by 19.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 58%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was CA$0.68 in 2015, and the most recent fiscal year payment was CA$0.73. Dividend payments have grown at less than 1% a year over this period. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Whitecap Resources has grown earnings per share at 62% per year over the past five years. Whitecap Resources is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Overall, we like to see the dividend staying consistent, and we think Whitecap Resources might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Whitecap Resources that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.