The board of Crescent Energy Company (NYSE:CRGY) has announced that it will pay a dividend on the 3rd of September, with investors receiving $0.12 per share. This payment means that the dividend yield will be 4.6%, which is around the industry average.

Check out our latest analysis for Crescent Energy

Crescent Energy Is Paying Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, the dividend made up 281% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

The next 12 months is set to see EPS grow by 53.0%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Crescent Energy's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. There hasn't been much of a change in the dividend over the last 2 years. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Crescent Energy's EPS has declined at around 73% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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.

We should note that Crescent Energy has issued stock equal to 37% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

We're Not Big Fans Of Crescent Energy's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Crescent Energy make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.