Secure Energy Services' Dividend: A Steady Hand in a Volatile Sector?

The energy services sector has long been a rollercoaster for investors, with commodity price swings, geopolitical risks, and regulatory shifts creating uncertainty. Yet within this volatility, Secure Energy Services (SES: TSE)—now rebranded as SECURE Waste Infrastructure—has quietly maintained a steady quarterly dividend of CAD 0.10 per share since late 2022. This consistency stands out, but the question remains: Can the dividend endure as the company pivots to industrial waste infrastructure and faces macroeconomic headwinds? Let's dissect the numbers.

The Dividend: Stable, but Not Growing

Since December 2022, SECURE has paid out CAD 0.10 per share every quarter, totaling an annual yield of 3.15% as of June 2025. While this stability is a plus for income investors, the dividend has seen zero growth since its last increase in late 2022—a period when many energy firms hiked payouts as oil prices surged.

The lack of growth isn't entirely surprising. SECURE's dividend payout ratio based on earnings is a conservative 20%, suggesting ample earnings cover. But its cash flow payout ratio is alarmingly high at 248.71%, meaning dividends exceeded cash flow in the trailing 12 months. This discrepancy highlights a key risk: cash flow volatility.

The dividend yield has fluctuated between 0.6% and 1.5% quarterly, but the trailing 12-month yield hit 3.15% in early 2025.

Financial Health: Strong Earnings, Cash Flow Concerns

SECURE's Q1 2025 results underscore its operational resilience. Adjusted EBITDA reached CAD 121 million (CAD 0.52/share), while discretionary free cash flow came in at CAD 67 million (CAD 0.29/share). For the full year 2024, Adjusted EBITDA hit CAD 490 million, with funds flow from operations of CAD 411 million.

The company has also returned CAD 761 million to shareholders in 2024 alone—CAD 657 million via buybacks and the rest via dividends. This aggressive buyback program (reducing shares outstanding by 19%) has bolstered per-share metrics. However, the heavy reliance on cash flow to fund dividends raises eyebrows.

Growth Strategy: Betting on Infrastructure, Not Oil

SECURE's pivot to waste infrastructure—a move formalized with its rebranding—could be a masterstroke. The company is expanding water disposal capacity in the Montney region, acquiring metals recycling facilities, and reactivating industrial waste processing sites. These investments align with long-term trends: North America's energy transition is creating demand for waste management, while metals recycling is booming due to EV adoption.

Management has guided 2025 Adjusted EBITDA to CAD 510–540 million, a 10% increase over 2024's pro forma results. Discretionary free cash flow is projected at CAD 270–300 million, which should support the CAD 0.10 dividend and ongoing buybacks.

Risks on the Horizon

1. Cash Flow Sustainability: The 248% cash flow payout ratio must improve. SECURE's 2025 capital spending plan—CAD 265 million for growth and acquisitions—could strain cash reserves if projects overrun budgets.
2. Debt Levels: While leverage is low (0.8x at year-end 2024), any significant economic downturn could pressure cash flows and limit flexibility.
3. Sector Competition: The waste infrastructure space is attracting new entrants, particularly in recycling and industrial waste management.

Investment Takeaways

• For Income Investors: The dividend's 3.15% yield is attractive, especially in a low-interest-rate environment. But buyers should acknowledge the cash flow risk and consider dollar-cost averaging into the stock.
• Growth Potential: The shift to infrastructure is strategic, but investors should monitor 2025 cash flow results closely. A dividend increase would require a sustained improvement in free cash flow.
• Valuation: At current prices, SECURE trades at 10.5x its 2025 EBITDA midpoint. This is reasonable for a defensive, cash-generative asset, but not a screaming bargain.

Final Verdict

SECURE's dividend is sustainable, but not without risks. The company's earnings resilience and infrastructure focus provide a solid foundation, but cash flow execution will determine its long-term health. For income-focused investors willing to stomach some volatility, it's a watchlist candidate—particularly if the stock dips further. However, those seeking dividend growth may want to wait until SECURE raises its payout again.

EBITDA growth targets suggest stability, but free cash flow must catch up to dividend demands.

In a sector as unpredictable as energy services, SECURE's dividend has been a rare constant. The question now is whether its infrastructure bet can turn that consistency into something more durable.