Panhandle Oil and Gas Inc. (NYSE:PHX) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 21st of August in order to be eligible for this dividend, which will be paid on the 6th of September.
Panhandle Oil and Gas's next dividend payment will be US$0.04 per share, and in the last 12 months, the company paid a total of US$0.16 per share. Calculating the last year's worth of payments shows that Panhandle Oil and Gas has a trailing yield of 1.4% on the current share price of $11.2. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Panhandle Oil and Gas paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Panhandle Oil and Gas generated enough free cash flow to afford its dividend.
Panhandle Oil and Gas paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
It's positive to see that Panhandle Oil and Gas'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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Panhandle Oil and Gas, with earnings per share up 2.5% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Panhandle Oil and Gas has increased its dividend at approximately 1.3% a year on average.
To Sum It Up
Is Panhandle Oil and Gas an attractive dividend stock, or better left on the shelf? Panhandle Oil and Gas has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. In summary, it's hard to get excited about Panhandle Oil and Gas from a dividend perspective.
Curious about whether Panhandle Oil and Gas has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
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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