Inter Pipeline Ltd (TSX:IPL) already cut its monthly dividend earlier this year, from $0.1425 to $0.04. The oil and gas stock's still paying a decent yield of 3.8% per year.
However, given the instability in not just the oil and gas industry but the Canadian economy as a whole, it's not unreasonable to expect that the stock could cut its dividend again this year.
In its first-quarter results, Inter Pipeline saw its sales decline by more than 8% from the prior-year period. It still recorded a profit of $89.1 million, but that too was down over 9%.
While the early results may not look too troubling, investors also need to remember this is only up until March 31. The effects of lower oil prices and COVID-19 will have a larger impact on the oil and gas industry in the coming months.
The summer months aren't likely to be all that busy. With air travel virtually non-existent, demand of oil is already poised to take a big hit this year. The industry's feeling the impact from multiple fronts – low supply and low demand.
And that's a recipe for disaster.
If you're considering investing in Inter Pipeline for its dividend, you should consider waiting until it releases its next quarterly results.
At that point, investors may get a better idea of not just how strong the company looks but whether management decides to cut or suspend the dividend. At that point, they'll have a much better view of where the company stands and how good or bad the outlook is for the industry at that point.
Remember, just because Inter Pipeline's already cut its dividend this year doesn't mean it won't do it again if it feels the need to.
