In This Article:
New Fortress Energy Inc.'s (NASDAQ:NFE) investors are due to receive a payment of $0.10 per share on 27th of December. This means the annual payment is 9.6% of the current stock price, which is above the average for the industry.
View our latest analysis for New Fortress Energy
New Fortress Energy's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the dividend made up 178% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.
The next year is set to see EPS grow by 164.8%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 67% which brings it into quite a comfortable range.
New Fortress Energy Doesn't Have A Long Payment History
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2020, the dividend has gone from $0.40 total annually to $3.40. This implies that the company grew its distributions at a yearly rate of about 104% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
Dividend Growth Could Be Constrained
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that New Fortress Energy has been growing its earnings per share at 58% a year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.
New Fortress 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. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for New Fortress Energy that you should be aware of before investing. Is New Fortress Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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.