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Freeport-McMoRan Inc.'s (NYSE:FCX) investors are due to receive a payment of $0.15 per share on 1st of November. The dividend yield is 1.6% based on this payment, which is a little bit low compared to the other companies in the industry.
Check out our latest analysis for Freeport-McMoRan
Freeport-McMoRan's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Freeport-McMoRan's dividend was only 41% of earnings, however it was paying out 225% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Over the next year, EPS is forecast to expand by 71.5%. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $1.25 in 2013 to the most recent total annual payment of $0.60. This works out to be a decline of approximately 7.1% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Come By
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's not great to see that Freeport-McMoRan's earnings per share has fallen at approximately 5.9% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Freeport-McMoRan's payments, as there could be some issues with sustaining them into the future. While Freeport-McMoRan is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Freeport-McMoRan that investors need to be conscious of moving forward. Is Freeport-McMoRan 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.