Solaris Oilfield Infrastructure (NYSE:SOI) Is Increasing Its Dividend To $0.12
Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) will increase its dividend from last year's comparable payment on the 11th of December to $0.12. This will take the annual payment to 5.5% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for Solaris Oilfield Infrastructure
Solaris Oilfield Infrastructure's Earnings Easily Cover The Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, Solaris Oilfield Infrastructure is earning enough to cover the payment, but then it makes up 186% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
The next year is set to see EPS grow by 64.5%. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.
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. Since 2018, the dividend has gone from $0.40 total annually to $0.48. This implies that the company grew its distributions at a yearly rate of about 3.7% over that duration. 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.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Solaris Oilfield Infrastructure's EPS has declined at around 4.4% a year. 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. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
Solaris Oilfield Infrastructure's Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think Solaris Oilfield Infrastructure's payments are rock solid. While Solaris Oilfield Infrastructure is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Solaris Oilfield Infrastructure that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
