Surge Energy (TSX:SGY) has been making waves in the Canadian energy sector, particularly among investors eyeing robust dividend yields. Despite some price fluctuation, Surge Energy offers a compelling forward annual dividend yield of 9.3%, translating to an annual dividend rate of $0.52 per share. This attractive yield positions the dividend stock as a noteworthy consideration for income-focused investors.
The numbers
In its most recent financial disclosures, Surge Energy reported trailing 12-month revenue of $549.1 million, with net income attributable to common shareholders down $80.7 million. This resulted in diluted earnings per share (EPS) down $0.81. The dividend stock’s operating margin stands at 29.1%, and it maintains a return on assets of 3.1%. These figures suggest operational efficiency, though the negative net income indicates areas requiring attention.
The dividend stock’s balance sheet reveals total cash holdings of $11.5 million against a total debt of $238.2 million, thus leading to a debt-to-equity ratio of 31.5%. With a current ratio of 0.66, Surge Energy may face challenges in covering short-term liabilities, highlighting the importance of prudent cash flow management.
Market analysts have shown optimism regarding Surge Energy’s stock performance. The average 12-month price target is set at $9.50, with forecasts ranging between $8.50 and $10.50. This projection suggests a potential upside of approximately 68.4% from the current trading price! Such forecasts are encouraging for investors seeking capital appreciation alongside dividend income.
Considerations
However, it’s essential to consider the dividend stock’s volatility. With a beta of 2.4, Surge Energy’s share price exhibits higher volatility compared to the broader market. Over the past 52 weeks, the dividend stock has experienced a decline of 18.5%, indicating significant price fluctuations. Investors should assess their risk tolerance when considering positions in such volatile equities.
Looking ahead, Surge Energy should release its next earnings report on March 5, 2025. Analysts estimate quarterly revenue of $163.7 million, a slight decrease of 2.8% year-over-year. The projected EPS stands at $0.48, representing a substantial increase of 263.9% compared to the same period last year. These projections, if met, could signal a positive turnaround in the company’s financial performance.
In terms of profitability, the company maintains an operating margin of 29.1% and a return on assets of 3.1%. While these metrics indicate operational efficiency, the negative net income suggests areas that require strategic improvements. The dividend stock’s balance sheet shows total cash reserves of $11.5 million and total debt amounting to $238.2 million, thus resulting in a debt-to-equity ratio of 31.5%. With a current ratio of 0.66, there may be concerns regarding the company’s ability to meet short-term obligations, further underscoring the need for effective cash flow management.
Bottom line
All considered, Surge Energy presents a high dividend yield and potential for capital appreciation, thereby making it an attractive option for income-oriented investors. However, recent financial performance and stock volatility should also play a crucial role in investor considerations. As with any investment, conducting thorough research and aligning decisions with individual financial goals and risk tolerance is essential. But if your portfolio allows for the risk and you want some passive income for reinvestment, this dividend stock looks like a solid choice.
