Whitecap Resources Inc.'s (TSE:WCP) investors are due to receive a payment of CA$0.0608 per share on 15th of November. This means the annual payment is 7.1% of the current stock price, which is above the average for the industry.

See our latest analysis for Whitecap Resources

Whitecap Resources' Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Whitecap Resources' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to fall by 0.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 54%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Whitecap Resources Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from CA$0.63 total annually to CA$0.73. This means that it has been growing its distributions at 1.5% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Whitecap Resources has impressed us by growing EPS at 45% per year over the past five years. Whitecap Resources is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Whitecap Resources Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Whitecap Resources that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.