Epsilon Energy (NASDAQ:EPSN) Has Affirmed Its Dividend Of $0.0625
Epsilon Energy Ltd.'s (NASDAQ:EPSN) investors are due to receive a payment of $0.0625 per share on 29th of March. This means the dividend yield will be fairly typical at 5.0%.
See our latest analysis for Epsilon Energy
Epsilon Energy's Payment Has Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 116% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Looking forward, earnings per share could rise by 13.4% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.
Epsilon Energy Is Still Building Its Track Record
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The last annual payment of $0.25 was flat on the annual payment from2 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Epsilon Energy has seen EPS rising for the last five years, at 13% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
Our Thoughts On Epsilon Energy's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Epsilon Energy's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Epsilon Energy that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated 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.
