Is This 9% Yield Worth the Risk?

Just Energy Group Inc (TSX:JE)(NYSE:JE) has seen its share price drop 22% in just the past three months as a disappointing quarter has sent the stock reeling. Revenues were down 14% year-over-year in Q2 although a net loss of $69 million for the quarter was still smaller than the $167 million loss the company posted a year ago. The company blamed the poor performance on milder weather and disruptions caused by Hurricane Harvey.

As a result of the steep decline in price, the company’s dividend is now yielding more than 9% annually. The danger for investors is that if Just Energy is not able to put together some improved results that the dividend may be in jeopardy.

In the last two quarters the company’s free cash flow has not been enough to cover the dividends that Just Energy has paid to its shareholders and that could be a cause for concern.

However, in the trailing twelve months Just Energy’s earnings per share of $0.93 has been well in excess of the $0.50 that the company pays out in dividends annually. At this point it is too early to tell if a cut could be around the corner but without an improvement in its performance it may be imminent.

The stock is down more than 25% year-to-date and it could be a good value buy given the potential it has to rebound next year. This could be a great buy for investors that are comfortable taking on some risk, but for those investors where stable and consistent dividends are important, it may not be the best buy.