Yahoo Finance Vermilion Energy Inc. (TSE:VET) Pays A CA$0.12 Dividend In Just Four Days
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Vermilion Energy Inc. (TSE:VET) is about to go ex-dividend in just four days. 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. Therefore, if you purchase Vermilion Energy's shares on or after the 28th of June, you won't be eligible to receive the dividend, when it is paid on the 15th of July.
The company's next dividend payment will be CA$0.12 per share, on the back of last year when the company paid a total of CA$0.48 to shareholders. Based on the last year's worth of payments, Vermilion Energy has a trailing yield of 3.2% on the current stock price of CA$15.05. If you buy this business for its dividend, you should have an idea of whether Vermilion Energy's dividend is reliable and sustainable. So we need to investigate whether Vermilion Energy can afford its dividend, and if the dividend could grow.
See our latest analysis for Vermilion Energy
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Vermilion Energy reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Vermilion 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. What's good is that dividends were well covered by free cash flow, with the company paying out 18% of its cash flow last year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Vermilion Energy 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Vermilion Energy has seen its dividend decline 15% per annum on average over the past 10 years, which is not great to see.
Remember, you can always get a snapshot of Vermilion Energy's financial health, by checking our visualisation of its financial health, here.
The Bottom Line
Is Vermilion Energy worth buying for its dividend? 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.
On that note, you'll want to research what risks Vermilion Energy is facing. Our analysis shows 2 warning signs for Vermilion Energy and you should be aware of these before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
