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Occidental Petroleum (NYSE:OXY) Is Increasing Its Dividend To $0.22

Occidental Petroleum Corporation (NYSE:OXY) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of April to $0.22. Even though the dividend went up, the yield is still quite low at only 1.5%.

Check out our latest analysis for Occidental Petroleum

Occidental Petroleum's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Occidental Petroleum's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

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Over the next year, EPS is forecast to expand by 37.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
historic-dividend

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $2.56 in 2014 to the most recent total annual payment of $0.88. This works out to a decline of approximately 66% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Occidental Petroleum May Find It Hard To Grow The Dividend

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though Occidental Petroleum's EPS has declined at around 4.6% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Occidental Petroleum that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.