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Liberty Energy Inc. (NYSE:LBRT) has announced that it will pay a dividend of $0.08 per share on the 20th of March. The dividend yield is 1.4% based on this payment, which is a little bit low compared to the other companies in the industry.
See our latest analysis for Liberty Energy
Liberty Energy's Payment Could Potentially Have Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Liberty Energy was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 3.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.
Liberty Energy's Dividend Has Lacked Consistency
Looking back, Liberty Energy's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2019, the dividend has gone from $0.20 total annually to $0.32. This works out to be a compound annual growth rate (CAGR) of approximately 8.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
The Dividend Looks Likely To Grow
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. Liberty Energy has seen EPS rising for the last five years, at 17% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
We Really Like Liberty Energy's Dividend
Overall, we like to see the dividend staying consistent, and we think Liberty Energy might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. For example, we've identified 3 warning signs for Liberty Energy (1 is concerning!) that you should be aware of before investing. Is Liberty Energy 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.