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It looks like Peyto Exploration & Development Corp. (TSE:PEY) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Peyto Exploration & Development investors that purchase the stock on or after the 28th of April will not receive the dividend, which will be paid on the 13th of May.
The company's next dividend payment will be CA$0.05 per share, and in the last 12 months, the company paid a total of CA$0.60 per share. Calculating the last year's worth of payments shows that Peyto Exploration & Development has a trailing yield of 4.5% on the current share price of CA$13.21. If you buy this business for its dividend, you should have an idea of whether Peyto Exploration & Development's dividend is reliable and sustainable. As a result, readers should always check whether Peyto Exploration & Development has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Peyto Exploration & Development
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Peyto Exploration & Development is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.
It's positive to see that Peyto Exploration & Development's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Peyto Exploration & Development paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Peyto Exploration & Development, with earnings per share up 5.4% on average over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.