Yahoo Finance PrairieSky Royalty (TSE:PSK) Is Increasing Its Dividend To CA$0.12
PrairieSky Royalty Ltd. (TSE:PSK) has announced that it will be increasing its dividend on the 14th of April to CA$0.12. Even though the dividend went up, the yield is still quite low at only 2.1%.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that PrairieSky Royalty's stock price has increased by 30% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Check out our latest analysis for PrairieSky Royalty
PrairieSky Royalty's Earnings Easily Cover the Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, PrairieSky Royalty was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Looking forward, earnings per share is forecast to fall by 7.6% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 60%, which is comfortable for the company to continue in the future.
PrairieSky Royalty Is Still Building Its Track Record
It's nice to see that PrairieSky Royalty has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the payment over a full economic cycle. Since 2014, the dividend has gone from CA$1.27 to CA$0.48. Dividend payments have fallen sharply, down 62% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that PrairieSky Royalty has grown earnings per share at 43% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that PrairieSky Royalty could prove to be a strong dividend payer.
Our Thoughts On PrairieSky Royalty's Dividend
In summary, while it's always good to see the dividend being raised, we don't think PrairieSky Royalty's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for PrairieSky Royalty (2 are significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
