Enerflex Ltd. (TSE:EFX) has recently announced that it will be paying a dividend of $0.025 per share on July 11th. This dividend yield of 1.5% is slightly lower compared to other companies in the industry.
While Enerflex is not currently profitable, they are paying out less than 75% of their free cash flow, leaving plenty for reinvestment into the business. Cash flow is considered more important than accounting profit, so the dividend at this level seems sustainable.
Analysts are predicting a 59.8% growth in EPS over the next 12 months. Although the company is moving towards profitability, the positive free cash flows provide some reassurance that the dividend could continue.
It is worth noting that Enerflex has cut its dividend at least once in the last 10 years, with a 73% decrease from $0.265 in 2014 to $0.0724 in the most recent full-year payment. This declining trend is not favorable for shareholders.
With a history of shrinking dividends and a significant decline in earnings per share over the last five years, the dividend growth potential is limited. While next year’s earnings are expected to increase, it is important to wait for a consistent pattern before getting too optimistic.
In conclusion, while the dividend has not been cut, there are concerns about its sustainability in the future due to past instability. Enerflex may not be the best choice for income investors. It is essential for investors to consider a company’s dividend policy and other factors before making investment decisions.