The board of Cenovus Energy Inc. (TSE:CVE) has announced that it will be paying its dividend of CA$0.20 on the 30th of June, an increased payment from last year's comparable dividend. This takes the annual payment to 4.6% of the current stock price, which is about average for the industry.

Our free stock report includes 2 warning signs investors should be aware of before investing in Cenovus Energy. Read for free now.

Cenovus Energy's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Cenovus Energy was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 62.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.TSX:CVE Historic Dividend May 11th 2025

View our latest analysis for Cenovus Energy

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from CA$1.06 total annually to CA$0.855. The dividend has shrunk at around 2.2% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Cenovus Energy has seen EPS rising for the last five years, at 46% per annum. Cenovus Energy is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Cenovus Energy's Dividend

Overall, a dividend increase is always good, and we think that Cenovus Energy is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Cenovus Energy that investors should take into consideration. Is Cenovus Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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