InPlay Oil (TSE:IPO) Has Affirmed Its Dividend Of CA$0.015
InPlay Oil Corp.'s (TSE:IPO) investors are due to receive a payment of CA$0.015 per share on 30th of November. Based on this payment, the dividend yield on the company's stock will be 6.9%, which is an attractive boost to shareholder returns.
View our latest analysis for InPlay Oil
InPlay Oil's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, InPlay Oil's dividend was only 21% of earnings, however it was paying out 96% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Over the next year, EPS is forecast to fall by 36.4%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 52%, which is comfortable for the company to continue in the future.
InPlay Oil Doesn't Have A Long Payment History
It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that InPlay Oil has grown earnings per share at 45% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While InPlay Oil is earning enough to cover the payments, the cash flows are lacking. We don't think InPlay Oil is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 5 warning signs for InPlay Oil (of which 1 doesn't sit too well with us!) you should know about. 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.
