Yahoo Finance It Might Not Be A Great Idea To Buy Crescent Point Energy Corp. (TSE:CPG) For Its Next Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Crescent Point Energy Corp. (TSE:CPG) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 12th of March in order to be eligible for this dividend, which will be paid on the 1st of April.
Crescent Point Energy's next dividend payment will be CA$0.01 per share, and in the last 12 months, the company paid a total of CA$0.04 per share. Based on the last year's worth of payments, Crescent Point Energy has a trailing yield of 1.4% on the current stock price of CA$2.91. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Crescent Point Energy can afford its dividend, and if the dividend could grow.
See our latest analysis for Crescent Point Energy
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Crescent Point Energy lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Crescent Point Energy 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. It paid out 5.2% of its free cash flow as dividends last year, which is conservatively low.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Crescent Point Energy reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Crescent Point Energy has seen its dividend decline 46% per annum on average over the past ten years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
Get our latest analysis on Crescent Point Energy's balance sheet health here.
Final Takeaway
Has Crescent Point Energy 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." It's not that we think Crescent Point Energy is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
With that being said, if you're still considering Crescent Point Energy as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 1 warning sign for Crescent Point Energy that we recommend you consider before investing in the business.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.
