Paramount Resources Ltd. (TSE:POU) Will Pay A CA$0.125 Dividend In Four Days
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Paramount Resources Ltd. (TSE:POU) is about to trade ex-dividend in the next 4 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. 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. Accordingly, Paramount Resources investors that purchase the stock on or after the 14th of March will not receive the dividend, which will be paid on the 28th of March.
The company's next dividend payment will be CA$0.125 per share, and in the last 12 months, the company paid a total of CA$1.50 per share. Last year's total dividend payments show that Paramount Resources has a trailing yield of 5.6% on the current share price of CA$26.91. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Paramount Resources
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Paramount Resources paying out a modest 34% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the past year it paid out 172% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Paramount Resources paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Paramount Resources's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Paramount Resources has grown its earnings rapidly, up 65% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past three years, Paramount Resources has increased its dividend at approximately 84% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
From a dividend perspective, should investors buy or avoid Paramount Resources? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's hard to get excited about Paramount Resources from a dividend perspective.
In light of that, while Paramount Resources has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for Paramount Resources you should know about.
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.
