Yahoo Finance Consider This Before Buying Tourmaline Oil Corp (TSE:TOU) For The 2.0% Dividend
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Recently, Tourmaline Oil Corp (TSE:TOU) has started paying dividends to shareholders. Today it yields 2.0%. Let’s dig deeper into whether Tourmaline Oil should have a place in your portfolio.
Check out our latest analysis for Tourmaline Oil
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is it the top 25% annual dividend yield payer?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
Is is able to pay the current rate of dividends from its earnings?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Tourmaline Oil fare?
The current trailing twelve-month payout ratio for the stock is 16%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 24%, leading to a dividend yield of 1.9%. Moreover, EPS should increase to CA$1.35. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Tourmaline Oil as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether TOU one as a stable dividend player.
Relative to peers, Tourmaline Oil has a yield of 2.0%, which is on the low-side for Oil and Gas stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Tourmaline Oil for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three important aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for TOU’s future growth? Take a look at our free research report of analyst consensus for TOU’s outlook.
Valuation: What is TOU worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TOU is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
