Solaris Oilfield Infrastructure (NYSE:SOI) Will Pay A Larger Dividend Than Last Year At $0.12
Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) has announced that it will be increasing its dividend from last year's comparable payment on the 11th of December to $0.12. This takes the dividend yield to 5.4%, which shareholders will be pleased with.
View our latest analysis for Solaris Oilfield Infrastructure
Solaris Oilfield Infrastructure's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Solaris Oilfield Infrastructure's dividend was only 56% of earnings, however it was paying out 180% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Over the next year, EPS is forecast to expand by 63.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.
Solaris Oilfield Infrastructure Is Still Building Its Track Record
It is great to see that Solaris Oilfield Infrastructure has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 5 years was $0.40 in 2018, and the most recent fiscal year payment was $0.48. This means that it has been growing its distributions at 3.7% per annum over that time. Solaris Oilfield Infrastructure hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
The Dividend's Growth Prospects Are Limited
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Solaris Oilfield Infrastructure's earnings per share has fallen at approximately 3.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
The Dividend Could Prove To Be Unreliable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Solaris Oilfield Infrastructure is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Solaris Oilfield Infrastructure that investors need to be conscious of moving forward. 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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