Parex Resources (TSX:PXT) Announces Dividend of $0.385

2 min read | August 06, 2024 12:00 AM EDT | By Team Kalkine Media

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Parex Resources (TSX:PXT) Announces Dividend of $0.385 — Image source: Shutterstock

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The board of Parex Resources Inc. (TSX:PXT) has declared a dividend of $0.385 per share, set to be paid on September 16. This dividend increases the company's annual payment to 8.9% of the stock price, surpassing the typical payouts of many industry peers.

Dividend Coverage and Earnings Stability

A high dividend yield is of limited value if it is not backed by sustainable earnings. In Parex Resources' case, the dividend is well-supported by the company's earnings, indicating that most of the profits are retained for business growth. Although earnings per share (EPS) are projected to decline by 1.3% over the next year, the anticipated payout ratio is around 49%. This ratio is considered manageable, suggesting that the dividend is sustainable given the current earnings outlook.

Dividend Track Record and Stability

While Parex Resources has demonstrated a stable dividend history, the company has not been paying dividends for a lengthy period. From a total annual dividend of $0.39 in 2021, the company has increased its payment to $1.11 annually, reflecting a growth rate of approximately 42% per year. Despite this rapid growth, the short dividend history warrants caution as it is unclear whether the company can maintain this trajectory through varying economic conditions.

Growth Potential of the Dividend

The company's solid payment history may appeal to investors. Parex Resources has achieved an annual EPS growth rate of 7.9% over the past five years. With a low payout ratio and consistent earnings growth, the company appears to be reinvesting effectively. This positions Parex Resources well for potential future dividend increases, providing further appeal for long-term investors.

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