Paramount Resources (TSE:POU) Will Pay A Dividend Of CA$0.125
The board of Paramount Resources Ltd. (TSE:POU) has announced that it will pay a dividend on the 29th of December, with investors receiving CA$0.125 per share. This means the dividend yield will be fairly typical at 5.9%.
See our latest analysis for Paramount Resources
Paramount Resources' Dividend Is Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. But before making this announcement, Paramount Resources' earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 81% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.
Looking forward, earnings per share is forecast to fall by 1.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 59%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Paramount Resources Doesn't Have A Long Payment History
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 dividend has gone from an annual total of CA$0.24 in 2021 to the most recent total annual payment of CA$1.50. This implies that the company grew its distributions at a yearly rate of about 150% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Paramount Resources has seen EPS rising for the last five years, at 68% per annum. 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.
Our Thoughts On Paramount Resources' Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Paramount Resources has been making. We don't think Paramount Resources is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Paramount Resources that investors need to be conscious of moving forward. Is Paramount Resources not quite the opportunity you were looking for? Why not check out our selection of top 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.
