Public Joint Stock Company Gazprom Neft (MCX:SIBN) stock is about to trade ex-dividend in 4 days time. Ex-dividend means that investors that purchase the stock on or after the 17th of October will not receive this dividend, which will be paid on the 1st of January.
Gazprom Neft's next dividend payment will be ₽18.1 per share, and in the last 12 months, the company paid a total of ₽30.0 per share. Calculating the last year's worth of payments shows that Gazprom Neft has a trailing yield of 7.1% on the current share price of RUB422. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Gazprom Neft paid out a comfortable 33% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Gazprom Neft's earnings per share have been growing at 19% a year for the past five years. Gazprom Neft is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Gazprom Neft has delivered an average of 19% per year annual increase in its dividend, based on the past ten years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Has Gazprom Neft got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Gazprom Neft paid out less than half its earnings and a bit over half its free cash flow. Gazprom Neft looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of Gazprom Neft? See what analysts 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.