Cenovus Energy Inc. (TSE:CVE) Pays A CA$0.20 Dividend In Just Four Days
It looks like Cenovus Energy Inc. (TSE:CVE) is about to go ex-dividend in the next four 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 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. Therefore, if you purchase Cenovus Energy's shares on or after the 15th of December, you won't be eligible to receive the dividend, when it is paid on the 31st of December.
The company's upcoming dividend is CA$0.20 a share, following on from the last 12 months, when the company distributed a total of CA$0.78 per share to shareholders. Looking at the last 12 months of distributions, Cenovus Energy has a trailing yield of approximately 3.2% on its current stock price of CA$24.61. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Cenovus Energy's payout ratio is modest, at just 44% of profit. 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. Thankfully its dividend payments took up just 50% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Cenovus Energy'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 Cenovus Energy
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Cenovus Energy's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Cenovus Energy's dividend payments per share have declined at 3.1% per year on average over the past 10 years, which is uninspiring.
To Sum It Up
Is Cenovus Energy an attractive dividend stock, or better left on the shelf? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. In summary, it's hard to get excited about Cenovus Energy from a dividend perspective.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Cenovus Energy has 1 warning sign we think you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.