Yahoo Finance There's A Lot To Like About ConocoPhillips' (NYSE:COP) Upcoming US$0.51 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ConocoPhillips (NYSE:COP) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase ConocoPhillips' shares before the 15th of May in order to receive the dividend, which the company will pay on the 1st of June.
The company's upcoming dividend is US$0.51 a share, following on from the last 12 months, when the company distributed a total of US$5.44 per share to shareholders. Based on the last year's worth of payments, ConocoPhillips has a trailing yield of 5.4% on the current stock price of $101.53. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether ConocoPhillips can afford its dividend, and if the dividend could grow.
See our latest analysis for ConocoPhillips
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see ConocoPhillips paying out a modest 40% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that ConocoPhillips's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see ConocoPhillips's earnings have been skyrocketing, up 29% per annum for the past five years. ConocoPhillips is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ConocoPhillips has delivered 7.5% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is ConocoPhillips an attractive dividend stock, or better left on the shelf? ConocoPhillips has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about ConocoPhillips, and we would prioritise taking a closer look at it.
In light of that, while ConocoPhillips has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for ConocoPhillips (1 is a bit concerning) you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.
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