Murphy Oil (NYSE:MUR) Is Paying Out A Larger Dividend Than Last Year
Murphy Oil Corporation's (NYSE:MUR) dividend will be increasing from last year's payment of the same period to $0.275 on 1st of September. Despite this raise, the dividend yield of 2.5% is only a modest boost to shareholder returns.
Check out our latest analysis for Murphy Oil
Murphy Oil's Payment Has Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Murphy Oil's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
EPS is set to fall by 31.6% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 22%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $1.25 in 2013, and the most recent fiscal year payment was $1.10. This works out to be a decline of approximately 1.3% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Murphy Oil has seen EPS rising for the last five years, at 37% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Murphy Oil Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Murphy Oil is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Murphy Oil (1 can't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
