Whitecap Resources Inc. (TSE:WCP) Pays A CA$0.0608 Dividend In Just Four Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Whitecap Resources Inc. (TSE:WCP) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Whitecap Resources' shares before the 31st of August to receive the dividend, which will be paid on the 15th of September.

The company's next dividend payment will be CA$0.0608 per share, on the back of last year when the company paid a total of CA$0.73 to shareholders. Looking at the last 12 months of distributions, Whitecap Resources has a trailing yield of approximately 4.2% on its current stock price of CA$17.51. If you buy this business for its dividend, you should have an idea of whether Whitecap Resources's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. Whitecap Resources paid out 62% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 44% of its free cash flow in the past year.

It's positive to see that Whitecap Resources'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.

Check out our latest analysis for Whitecap Resources

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Whitecap Resources's earnings per share have fallen at approximately 24% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Whitecap Resources dividends are largely the same as they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

To Sum It Up

Has Whitecap Resources got what it takes to maintain its dividend payments? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

Wondering what the future holds for Whitecap Resources? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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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.