Why It Might Not Make Sense To Buy High Arctic Energy Services Inc (TSE:HWO) For Its Upcoming Dividend

·3 min read

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that High Arctic Energy Services Inc (TSE:HWO) is about to go ex-dividend in just three 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 two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase High Arctic Energy Services' shares before the 29th of June in order to receive the dividend, which the company will pay on the 14th of July.

The company's next dividend payment will be CA$0.005 per share, and in the last 12 months, the company paid a total of CA$0.06 per share. Last year's total dividend payments show that High Arctic Energy Services has a trailing yield of 3.9% on the current share price of CA$1.52. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for High Arctic Energy Services

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. High Arctic Energy Services reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

Click here to see how much of its profit High Arctic Energy Services paid out over the last 12 months.

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historic-dividend

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. High Arctic Energy Services reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. High Arctic Energy Services has seen its dividend decline 6.7% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Get our latest analysis on High Arctic Energy Services's balance sheet health here.

To Sum It Up

From a dividend perspective, should investors buy or avoid High Arctic Energy Services? These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with High Arctic Energy Services. For instance, we've identified 3 warning signs for High Arctic Energy Services (1 makes us a bit uncomfortable) you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.