Yahoo Finance Three Days Left Until Paramount Resources Ltd. (TSE:POU) Trades Ex-Dividend
Readers hoping to buy Paramount Resources Ltd. (TSE:POU) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Paramount Resources investors that purchase the stock on or after the 14th of May will not receive the dividend, which will be paid on the 31st of May.
The company's next dividend payment will be CA$0.15 per share, on the back of last year when the company paid a total of CA$1.50 to shareholders. Last year's total dividend payments show that Paramount Resources has a trailing yield of 4.6% on the current share price of CA$32.71. If you buy this business for its dividend, you should have an idea of whether Paramount Resources's dividend is reliable and sustainable. As a result, readers should always check whether Paramount Resources has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Paramount Resources
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. Paramount Resources paid out 63% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Paramount Resources generated enough free cash flow to afford its dividend. It paid out an unsustainably high 335% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Paramount Resources intends to continue funding this dividend, or if it could be forced to cut the payment.
While Paramount Resources's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Paramount Resources to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Paramount Resources's earnings have been skyrocketing, up 60% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last three years, Paramount Resources has lifted its dividend by approximately 84% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Is Paramount Resources an attractive dividend stock, or better left on the shelf? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 335% of its cashflow, which is uncomfortably high. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
If you want to look further into Paramount Resources, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 3 warning signs with Paramount Resources and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
