Fool Canada’s first 1,000%+ winner?

Our Chief Investment Advisor, Iain Butler, and a team of The Motley Fool’s most talented investors from across the globe recently embarked on an unprecedented mission:

To identify the 20 Canadian small-cap companies they believe have the best shot at earning investors like you gains of 1,000%+ over the coming years.

For the next few days only, you can get the names and full details on these 20 potential “10-baggers” when you join Iain and his team in a first-of-its-kind project they have dubbed Discovery Canada 2017.

Will Crescent Point Energy Corp. Be the Next High Yielder to Cut its Dividend?

When entering 2016, TransAlta Corporation and Potash Corporation of Saskatchewan Inc. were the two highest-yielding stocks on the S&P/TSX 60. They both cut their dividends in January.

As a result, Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) is once again in the top spot on this list with its yield of 8.2%. It’s a position the company is very familiar with.

So that brings up the obvious question: Will Crescent Point cut its dividend?

How likely is another cut?

Crescent Point has already slashed its dividend once this year. Back in August the monthly per-share payout was reduced from $0.23 to $0.10. And when looking at the numbers, it’s clear why investors are expecting another cut.

According to its most recent investor presentation, Crescent Point would have a payout ratio of 100% assuming an average WTI oil price of US$40 this year. Unfortunately, even this scenario now seems optimistic and is well above current strip pricing.

It gets worse. This scenario “includes the expected impact of monetizing 2017/2018 oil and gas hedges in 2016.” If Crescent Point were to actually do this, it would leave the company more exposed to energy prices in future years, and this kind of strategy is certainly not sustainable.

At this point, Crescent Point would be better off abandoning its dividend altogether. It would allow the company to spend more money on capital projects at a time when labour and equipment costs are depressed. Or the company could buy back stock at a depressed price or repair its balance sheet. All of these options would be a better idea than a dividend that is unsustainable.

Is this a bet worth making?

If you’re looking for dividend stocks, there are certainly better options than Crescent Point. You’d have to accept a lower yield, but that’s a small price to pay for some piece of mind.

And if you’re looking to bet on oil prices, again, there are better options. After all, if you want to make an oil-price bet, why choose a company that pays such a high dividend, especially one that the company cannot afford?

Besides, Crescent Point has already shown it is very willing to cut its dividend. So there’s a good chance the company will do so at its next earnings announcement. I wouldn’t want to be a shareholder when that happens.

These three dividend stocks are far better options than Crescent Point

These three top stocks have delivered dividends for shareholders for decades (and even centuries!). Check out our special FREE report: "3 Dividend Stocks to Buy and Hold Forever". Click here now to get the full story!

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

NEW! This Stock Could Be Like Buying Amazon In 1997

For only the 5th time in over 14 years, Motley Fool co-founder David Gardner just issued a Buy Recommendation on this recent Canadian IPO.

Stock Advisor Canada’s Chief Investment Adviser, Iain Butler, also recommended this company back in March – and it’s already up a whopping 57%!

Enter your email address below to find out how you can claim your copy of this brand new report, “Breakthrough IPO Receives Rare Endorsement.”

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.