PHX Minerals' (NYSE:PHX) Dividend Will Be Increased To $0.0225
The board of PHX Minerals Inc. (NYSE:PHX) has announced that it will be paying its dividend of $0.0225 on the 3rd of March, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 2.8% is only a modest boost to shareholder returns.
Check out our latest analysis for PHX Minerals
PHX Minerals' Dividend Is Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, PHX Minerals' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Over the next year, EPS is forecast to expand by 30.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of $0.14 in 2013 to the most recent total annual payment of $0.09. The dividend has shrunk at around 4.3% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 17% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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 becomes a long term trend.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think PHX Minerals will make a great income stock. While PHX Minerals is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for PHX Minerals (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is PHX Minerals not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
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