Crescent Energy Company (NYSE:CRGY) will pay a dividend of $0.12 on the 2nd of December. This payment means the dividend yield will be 3.6%, which is below the average for the industry.

Check out our latest analysis for Crescent Energy

Crescent Energy's Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Crescent Energy's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. Generally, we think that this would be a risky long term practice.

Over the next year, EPS is forecast to expand by 182.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Crescent Energy's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The most recent annual payment of $0.48 is about the same as the annual payment 3 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Crescent Energy's EPS has fallen by approximately 65% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

We should note that Crescent Energy has issued stock equal to 27% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Crescent Energy's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Crescent Energy is a great stock to add to your portfolio if income is your focus.