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Is It Worth Considering Imperial Oil Limited (TSE:IMO) For Its Upcoming Dividend?

Simply Wall St

It looks like Imperial Oil Limited (TSE:IMO) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 4th of March in order to be eligible for this dividend, which will be paid on the 1st of April.

Imperial Oil's next dividend payment will be CA$0.22 per share, and in the last 12 months, the company paid a total of CA$0.88 per share. Last year's total dividend payments show that Imperial Oil has a trailing yield of 3.0% on the current share price of CA$29.02. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Imperial Oil

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Imperial Oil paying out a modest 30% of its earnings.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

TSX:IMO Historical Dividend Yield, February 28th 2020

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Imperial Oil's earnings per share have fallen at approximately 8.4% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past ten years, Imperial Oil has increased its dividend at approximately 8.2% a year on average.

The Bottom Line

Has Imperial Oil got what it takes to maintain its dividend payments? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. We think this is a pretty attractive combination, and would be interested in investigating Imperial Oil more closely.

Wondering what the future holds for Imperial Oil? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for dividend stocks, we recommend checking our list of top 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.