Be Sure To Check Out Hemisphere Energy Corporation (CVE:HME) Before It Goes Ex-Dividend
Readers hoping to buy Hemisphere Energy Corporation (CVE:HME) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Therefore, if you purchase Hemisphere Energy's shares on or after the 9th of February, you won't be eligible to receive the dividend, when it is paid on the 21st of February.
The company's next dividend payment will be CA$0.025 per share. Last year, in total, the company distributed CA$0.10 to shareholders. Last year's total dividend payments show that Hemisphere Energy has a trailing yield of 7.5% on the current share price of CA$1.33. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Hemisphere Energy
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. Hemisphere Energy paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Luckily it paid out just 22% of its free cash flow last year.
It's positive to see that Hemisphere 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.
Click here to see how much of its profit Hemisphere Energy 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Hemisphere Energy's earnings have been skyrocketing, up 70% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Hemisphere Energy looks like a promising growth company.
Unfortunately Hemisphere Energy has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
To Sum It Up
Has Hemisphere Energy got what it takes to maintain its dividend payments? Hemisphere Energy has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Hemisphere Energy looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
In light of that, while Hemisphere Energy has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Hemisphere Energy has 3 warning signs 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.
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