Cactus (NYSE:WHD) Has Announced A Dividend Of $0.12
Cactus, Inc.'s (NYSE:WHD) investors are due to receive a payment of $0.12 per share on 14th of December. Including this payment, the dividend yield on the stock will be 1.1%, which is a modest boost for shareholders' returns.
Check out our latest analysis for Cactus
Cactus' Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Cactus 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.
Looking forward, earnings per share is forecast to rise by 89.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 13% by next year, which is in a pretty sustainable range.
Cactus Is Still Building Its Track Record
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2019, the annual payment back then was $0.36, compared to the most recent full-year payment of $0.48. This implies that the company grew its distributions at a yearly rate of about 7.5% over that duration. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Cactus' EPS has declined at around 35% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
Our Thoughts On Cactus' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Cactus is a great stock to add to your portfolio if income is your focus.
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. Taking the debate a bit further, we've identified 2 warning signs for Cactus that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
