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Income Investors Should Know That TORC Oil & Gas Ltd. (TSE:TOG) Goes Ex-Dividend Soon

Simply Wall St

TORC Oil & Gas Ltd. (TSE:TOG) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 30th of January to receive the dividend, which will be paid on the 18th of February.

TORC Oil & Gas's upcoming dividend is CA$0.025 a share, following on from the last 12 months, when the company distributed a total of CA$0.30 per share to shareholders. Looking at the last 12 months of distributions, TORC Oil & Gas has a trailing yield of approximately 7.4% on its current stock price of CA$4.06. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for TORC Oil & Gas

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. TORC Oil & Gas reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If TORC Oil & Gas didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Thankfully its dividend payments took up just 45% of the free cash flow it generated, which is a comfortable payout ratio.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

TSX:TOG Historical Dividend Yield, January 25th 2020
TSX:TOG Historical Dividend Yield, January 25th 2020

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. TORC Oil & Gas was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. TORC Oil & Gas's dividend payments per share have declined at 8.2% per year on average over the past six years, which is uninspiring.

Get our latest analysis on TORC Oil & Gas's balance sheet health here.

Final Takeaway

Has TORC Oil & Gas got what it takes to maintain its dividend payments? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

Curious what other investors think of TORC Oil & Gas? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.