Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tourmaline Oil Corp. (TSE:TOU) is about to trade ex-dividend in the next three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Tourmaline Oil's shares on or after the 15th of May, you won't be eligible to receive the dividend, when it is paid on the 26th of May.

The company's next dividend payment will be CA$0.35 per share. Last year, in total, the company distributed CA$3.85 to shareholders. Based on the last year's worth of payments, Tourmaline Oil has a trailing yield of 6.2% on the current stock price of CA$62.55. If you buy this business for its dividend, you should have an idea of whether Tourmaline Oil's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Tourmaline Oil's payout ratio is modest, at just 45% of profit. A useful secondary check can be to evaluate whether Tourmaline Oil generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (85%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for Tourmaline Oil

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.TSX:TOU Historic Dividend May 11th 2025

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Tourmaline Oil has grown its earnings rapidly, up 23% a year for the past five years.

Story Continues

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past seven years, Tourmaline Oil has increased its dividend at approximately 43% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Should investors buy Tourmaline Oil for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Tourmaline Oil, and we would prioritise taking a closer look at it.

In light of that, while Tourmaline Oil has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for Tourmaline Oil that you should be aware of before investing in their shares.

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.

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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.

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