Yahoo Finance Only 4 Days Left To Cash In On TORC Oil & Gas Ltd. (TSE:TOG) Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see TORC Oil & Gas Ltd. (TSE:TOG) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 30th of July will not receive this dividend, which will be paid on the 15th of August.
TORC Oil & Gas's next dividend payment will be CA$0.025 per share, and in the last 12 months, the company paid a total of CA$0.26 per share. Based on the last year's worth of payments, TORC Oil & Gas has a trailing yield of 7.4% on the current stock price of CA$4.03. If you buy this business for its dividend, you should have an idea of whether TORC Oil & Gas's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for TORC Oil & Gas
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. An unusually high payout ratio of 307% of its profit suggests something is happening other than the usual distribution of profits to shareholders. A useful secondary check can be to evaluate whether TORC Oil & Gas generated enough free cash flow to afford its dividend. Fortunately, it paid out only 39% of its free cash flow in the past year.
It's good to see that while TORC Oil & Gas's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see TORC Oil & Gas's earnings have been skyrocketing, up 21% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. TORC Oil & Gas has seen its dividend decline 8.2% per annum on average over the past 6 years, which is not great to see. TORC Oil & Gas is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
Should investors buy TORC Oil & Gas for the upcoming dividend? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with TORC Oil & Gas's paying out such a high percentage of its profit. Overall, it's hard to get excited about TORC Oil & Gas from a dividend perspective.
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 .
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.
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.
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. Thank you for reading.
