- Oops!Something went wrong.Please try again later.
Northern Oil and Gas, Inc.'s ( NYSE:NOG ) dividend will be increasing from last year's payment of the same period to $0.19 on 29th of July. Although the dividend is now higher, the yield is only 2.8%, which is below the industry average.
Northern Oil and Gas' Distributions May Be Difficult To Sustain
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even though Northern Oil and Gas is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.
Recent, EPS has fallen by 9.1%, so this could continue over the next year. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.
Northern Oil and Gas Doesn't Have A Long Payment History
It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
Dividend Growth Is Doubtful
Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Northern Oil and Gas' earnings per share has shrunk at approximately 9.1% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
We'd also point out that Northern Oil and Gas has issued stock equal to 18% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
Northern Oil and Gas' Dividend Doesn't Look Great
In conclusion, we have some concerns about this dividend, even though it being raised is good. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 6 warning signs for Northern Oil and Gas (2 don't sit too well with us!) 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.