Yahoo Finance Why You Might Be Interested In Whitecap Resources Inc. (TSE:WCP) For Its Upcoming Dividend
Whitecap Resources Inc. (TSE:WCP) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Whitecap Resources' shares before the 29th of April to receive the dividend, which will be paid on the 15th of May.
The company's next dividend payment will be CA$0.0608 per share, on the back of last year when the company paid a total of CA$0.73 to shareholders. Based on the last year's worth of payments, Whitecap Resources stock has a trailing yield of around 6.8% on the current share price of CA$10.75. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Whitecap 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. Fortunately Whitecap Resources's payout ratio is modest, at just 41% of profit. A useful secondary check can be to evaluate whether Whitecap Resources generated enough free cash flow to afford its dividend. Fortunately, it paid out only 47% of its free cash flow in the past year.
It's positive to see that Whitecap Resources's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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 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 Whitecap Resources's earnings have been skyrocketing, up 57% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Whitecap Resources has lifted its dividend by approximately 2.0% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Whitecap Resources is keeping back more of its profits to grow the business.
Final Takeaway
From a dividend perspective, should investors buy or avoid Whitecap Resources? We love that Whitecap Resources is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Whitecap Resources, and we would prioritise taking a closer look at it.
In light of that, while Whitecap Resources has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for Whitecap Resources (1 doesn't sit too well with us) you should be aware of.
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.
