Berry Petroleum Corporation (NASDAQ:BRY) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 12th of September in order to receive the dividend, which the company will pay on the 15th of October.
Berry Petroleum's next dividend payment will be US$0.12 per share, on the back of last year when the company paid a total of US$0.48 to shareholders. Based on the last year's worth of payments, Berry Petroleum stock has a trailing yield of around 5.5% on the current share price of $8.66. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Berry Petroleum can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Berry Petroleum paid out a comfortable 45% of its profit last year. A useful secondary check can be to evaluate whether Berry Petroleum generated enough free cash flow to afford its dividend. It paid out more than half (50%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Berry Petroleum'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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend.
We'd also point out that Berry Petroleum issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Given that Berry Petroleum has only been paying a dividend for a year, there's not much of a past history to draw insight from.
Should investors buy Berry Petroleum for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Berry Petroleum, and we would prioritise taking a closer look at it.
Wondering what the future holds for Berry Petroleum? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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