Targa Resources Corp's Dividend Analysis
Assessing the Sustainability of TRGP's Upcoming Dividend
Targa Resources Corp (NYSE:TRGP) recently announced a dividend of $0.50 per share, payable on February 15, 2024, with the ex-dividend date set for January 30, 2024. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Targa Resources Corp's dividend performance and assess its sustainability.
What Does Targa Resources Corp Do?
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Targa Resources is a midstream energy company that primarily operates gathering and processing assets with substantial positions in the Permian, Stack, Scoop, and Bakken plays. It boasts a considerable gross fractionation capacity of 843,000 barrels a day at Mont Belvieu and operates a liquefied petroleum gas export terminal. Additionally, the Grand Prix natural gas liquids pipeline recently became fully operational, marking a significant milestone for the company.
A Glimpse at Targa Resources Corp's Dividend History
Targa Resources Corp has maintained a consistent dividend payment record since 2011, distributing dividends on a quarterly basis. Below is a chart showing the annual Dividends Per Share to track historical trends.
Breaking Down Targa Resources Corp's Dividend Yield and Growth
As of today, Targa Resources Corp currently has a 12-month trailing dividend yield of 2.13% and a 12-month forward dividend yield of 2.30%, indicating an expectation of increased dividend payments over the next 12 months. Over the past three years, Targa Resources Corp's annual dividend growth rate was -27.30%. When extended to a five-year horizon, this rate decreased to -30.00% per year, and over the past decade, the annual dividends per share growth rate stands at -8.00%.
Based on Targa Resources Corp's dividend yield and five-year growth rate, the 5-year yield on cost for Targa Resources Corp stock as of today is approximately 0.36%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of September 30, 2023, Targa Resources Corp's dividend payout ratio is 0.45.
Targa Resources Corp's profitability rank, offers an understanding of the company's earning prowess relative to its peers. GuruFocus ranks Targa Resources Corp's profitability 7 out of 10 as of September 30, 2023, suggesting good profitability prospects. The company has reported net profit in 7 out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Targa Resources Corp's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Targa Resources Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Targa Resources Corp's revenue has increased by approximately 34.40% per year on average, a rate that outperforms approximately 85.92% of global competitors.
Concluding Thoughts on Targa Resources Corp's Dividend Outlook
In conclusion, while Targa Resources Corp's dividend growth rate has seen a decline over various time frames, the company's current yield and payout ratio suggest a level of sustainability. The profitability and growth metrics further support the possibility of continued dividend payments. However, investors should always consider the broader economic context and the company's future prospects when evaluating the attractiveness of its dividend. Will Targa Resources Corp maintain its dividend amid industry challenges, or will it adjust to accommodate growth and investment? This is a vital question for value investors to consider.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
