Blog

The board of Pine Cliff Energy Ltd. (TSE:PNE) has announced that it will pay a dividend on the 28th of November, with investors receiving CA$0.0013 per share. Including this payment, the dividend yield on the stock will be 1.8%, which is a modest boost for shareholders’ returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Pine Cliff Energy’s stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part – they are all under $10bn in marketcap – there is still time to get in early.

Even a low dividend yield can be attractive if it is sustained for years on end. Pine Cliff Energy is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS might fall by 9.6% based on recent performance. This means that the company won’t turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.

Check out our latest analysis for Pine Cliff Energy

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. The annual payment during the last 4 years was CA$0.0996 in 2021, and the most recent fiscal year payment was CA$0.015. The dividend has fallen 85% over that period. Declining dividends isn’t generally what we look for as they can indicate that the company is running into some challenges.

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It’s not great to see that Pine Cliff Energy’s earnings per share has fallen at approximately 9.6% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Overall, we don’t think this company makes a great dividend stock, even though the dividend wasn’t cut this year. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we’ve identified 2 warning signs for Pine Cliff Energy (1 is a bit concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.