Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Liberty Oilfield Services Inc. (NYSE:LBRT) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 5th of September to receive the dividend, which will be paid on the 20th of September.
Liberty Oilfield Services's upcoming dividend is US$0.05 a share, following on from the last 12 months, when the company distributed a total of US$0.20 per share to shareholders. Based on the last year's worth of payments, Liberty Oilfield Services stock has a trailing yield of around 1.9% on the current share price of $10.77. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Liberty Oilfield Services is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Liberty Oilfield Services generated enough free cash flow to afford its dividend. It paid out 20% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Liberty Oilfield Services's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. From this perspective, we're disturbed to see earnings per share plunged 51% over the last 12 months, and we'd wonder if the company has had some kind of major event that has skewed the calculation.
Unfortunately Liberty Oilfield Services has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
To Sum It Up
Is Liberty Oilfield Services an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's hard to get excited about Liberty Oilfield Services from a dividend perspective.
Wondering what the future holds for Liberty Oilfield Services? See what the 13 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.