Yahoo Finance Enerflex (TSE:EFX) Is Paying Out A Dividend Of CA$0.025
Enerflex Ltd.'s (TSE:EFX) investors are due to receive a payment of CA$0.025 per share on 6th of July. Including this payment, the dividend yield on the stock will be 1.2%, which is a modest boost for shareholders' returns.
View our latest analysis for Enerflex
Enerflex's Distributions May Be Difficult To Sustain
If it is predictable over a long period, even low dividend yields can be attractive. Even in the absence of profits, Enerflex is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.
Analysts expect the EPS to grow by 52.9% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of CA$0.24 in 2013 to the most recent total annual payment of CA$0.10. This works out to be a decline of approximately 8.4% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Has Limited Growth Potential
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings per share has been sinking by 46% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
We should note that Enerflex has issued stock equal to 38% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
We're Not Big Fans Of Enerflex's Dividend
In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Enerflex (1 doesn't sit too well with us!) that you should be aware of before investing. Is Enerflex not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
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