Tamarack Valley Energy (TSE:TVE) Will Pay A Dividend Of CA$0.0125
Tamarack Valley Energy Ltd.'s (TSE:TVE) investors are due to receive a payment of CA$0.0125 per share on 15th of March. This means the dividend yield will be fairly typical at 4.6%.
Check out our latest analysis for Tamarack Valley Energy
Tamarack Valley Energy's 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. Before making this announcement, Tamarack Valley Energy was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. Generally, we think that this would be a risky long term practice.
Earnings per share is forecast to rise by 17.4% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 81% - on the higher side, but we wouldn't necessarily say this is unsustainable.
Tamarack Valley 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 annual payment during the last 2 years was CA$0.0996 in 2022, and the most recent fiscal year payment was CA$0.15. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. Tamarack Valley Energy has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
Dividend Growth Could Be Constrained
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Tamarack Valley Energy has grown earnings per share at 39% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Tamarack Valley Energy hasn't been doing.
Tamarack Valley Energy's Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. 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. Just as an example, we've come across 4 warning signs for Tamarack Valley Energy you should be aware of, and 3 of them make us uncomfortable. Is Tamarack Valley Energy 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.
