U.S. markets closed

We Wouldn't Be Too Quick To Buy Evolution Petroleum Corporation (NYSEMKT:EPM) Before It Goes Ex-Dividend

Simply Wall St

It looks like Evolution Petroleum Corporation (NYSEMKT:EPM) is about to go ex-dividend in the next 4 days. You will need to purchase shares before the 13th of March to receive the dividend, which will be paid on the 31st of March.

Evolution Petroleum's upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Looking at the last 12 months of distributions, Evolution Petroleum has a trailing yield of approximately 8.2% on its current stock price of $4.86. If you buy this business for its dividend, you should have an idea of whether Evolution Petroleum's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Evolution Petroleum

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Evolution Petroleum distributed an unsustainably high 129% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out an unsustainably high 222% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.

Evolution Petroleum does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

Cash is slightly more important than profit from a dividend perspective, but given Evolution Petroleum's payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

AMEX:EPM Historical Dividend Yield, March 8th 2020

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Evolution Petroleum's earnings have been skyrocketing, up 27% per annum for the past five years. Earnings per share are increasing at a rapid rate, but the company is paying out more than we think is sustainable, based on current earnings. Companies that pay out more than they earned while growing rapidly, can find themselves short of cash in a few years when growth slows.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Evolution Petroleum's dividend payments are broadly unchanged compared to where they were six years ago.

Final Takeaway

Should investors buy Evolution Petroleum for the upcoming dividend? Earnings per share have been growing, despite the company paying out a concerningly high percentage of its earnings and cashflow. We struggle to see how a company paying out so much of its earnings and cash flow will be able to sustain its dividend in a downturn, or reinvest enough into its business to continue growing earnings without borrowing heavily. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

With that in mind though, if the poor dividend characteristics of Evolution Petroleum don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 3 warning signs for Evolution Petroleum (1 shouldn't be ignored!) that deserve your attention before investing in the shares.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

  • Dow 15,000 very likely as coronavirus pandemic hits U.S. economy: strategist
    Business
    Yahoo Finance

    Dow 15,000 very likely as coronavirus pandemic hits U.S. economy: strategist

    He thinks the economy could begin to show signs of life in the fourth quarter of this year — but until that starts to show up somewhere in the markets or economic data, he prefers putting on trades that profit from extreme volatility and downside. Yahoo Finance highlights a call such as this because, well, McDonald has been dead right so far. Moreover, April has lived up to its billing in the early going as potentially lethal to stocks because of dreadful economic data nobody on Wall Street has ever seen before.

  • Warren Buffett Dumps Delta Air Lines, Southwest Airlines As Coronavirus Pandemic Slams Industry
    Business
    Investor's Business Daily

    Warren Buffett Dumps Delta Air Lines, Southwest Airlines As Coronavirus Pandemic Slams Industry

    Warren Buffett's Berkshire Hathaway has sold off millions of shares of Delta Air Lines and Southwest Airlines over the past few days, regulatory filings showed on Friday. That sent Delta stock, Southwest stock and other airline stocks lower after hours. Delta stock was down 9% in the stock market Friday.

  • He nailed the March coronavirus selloff — now he says there’s another 30% to go before the stock market hits bottom
    Business
    MarketWatch

    He nailed the March coronavirus selloff — now he says there’s another 30% to go before the stock market hits bottom

    Hedge-fund manager Dan Niles, in a note cited by Yahoo Finance this week, warned his clients way back in February that he was getting “increasingly worried” investors weren't ready for the impact the spread of the coronavirus could have on the U.S. economy. While the Dow Jones Industrial Average (DJIA)posted its worst first quarter ever, his Satori Fund closed in positive territory.

  • They Rented Their Cars Out Online. Then Things Fell Apart
    Business
    Bloomberg

    They Rented Their Cars Out Online. Then Things Fell Apart

    In interviews with Bloomberg, six car owners said they've had increasing trouble in recent months getting Getaround to pay for costs related to rentals. In two cases, car owners said Getaround had agreed to pay repair shops directly, but that mechanics wouldn't release their cars for days because the money didn't come through even after Getaround assured them it had been taken care of. In another incident, a user said the company has yet to send her the money renters paid to drive her car.

  • U.S. dairy farmers dump milk as pandemic upends food markets
    Business
    Reuters

    U.S. dairy farmers dump milk as pandemic upends food markets

    Despite strong demand for basic foods like dairy products amid the coronavirus pandemic, the milk supply chain has seen a host of disruptions that are preventing dairy farmers from getting their products to market. Mass closures of restaurants and schools have forced a sudden shift from those wholesale food-service markets to retail grocery stores, creating logistical and packaging nightmares for plants processing milk, butter and cheese. Trucking companies that haul dairy products are scrambling to get enough drivers as some who fear the virus have stopped working.

  • Co-founder of George Soros’s legendary Quantum Fund warns of the ‘worst bear market of my lifetime’
    Business
    MarketWatch

    Co-founder of George Soros’s legendary Quantum Fund warns of the ‘worst bear market of my lifetime’

    Jim Rogers has been sounding the bear alarm for a while, and now that the market finally seems to be cooperating, the Rogers Holdings chairman is turning up the volume. I expect in the next couple of years we're going to have the worst bear market in my lifetime,” he told Bloomberg in the wake of the worst first-quarter loss in the Dow's history. Why so glum?

  • MD Gov. confirms Kennedy family members missing
    U.S.
    Associated Press Videos

    MD Gov. confirms Kennedy family members missing

    Maryland Gov. Larry Hogan says that rescuers are searching for two missing boaters - the daughter and grandson of former Maryland Lt. Gov. Kathleen Kennedy Townsend - after their canoe was found in Chesapeake Bay. (April 3)

  • Trump threatens tariffs on oil imports to 'protect' U.S. energy workers
    Business
    Reuters

    Trump threatens tariffs on oil imports to 'protect' U.S. energy workers

    U.S. President Donald Trump said on Saturday he would impose tariffs on crude imports if he has to "protect" U.S. energy workers from the oil price crash that has been exacerbated by a war between Russia and Saudi Arabia over market share. "If I have to do tariffs on oil coming from outside or if I have to do something to protect our ... tens of thousands of energy workers and our great companies that produce all these jobs, I'll do whatever I have to do," Trump told reporters in a briefing about the coronavirus outbreak. Oil prices have dropped by about two-thirds this year as the pandemic crushes demand and as major producers Russia and Saudi Arabia boost output in a war over market share.

  • Goldman Sachs: These 3 Stocks Are Poised to Surge by at Least 35%
    Business
    TipRanks

    Goldman Sachs: These 3 Stocks Are Poised to Surge by at Least 35%

    Investment bank Goldman Sachs has been analyzing the market performance, and has a mixed outlook for the year – not necessarily bad news for the long term, but an acknowledgement that we're not completely certain what the economic cycle has in store. David Kostin, Goldman Sachs' chief U.S. equity strategist, predicts that the market has not found its true bottom yet, and has to meet three conditions before it can. Kostin notes that the current peak-to-trough time, of just 23 trading days, is an order of magnitude faster than the median – which stands at 17 months.

  • World
    Bloomberg

    Trump Warns of ‘Horrendous’ Phase, Many Fatalities: Virus Update

    U.S. leaders offered a somber outlook on the coronavirus pandemic with President Donald Trump warning of a “very horrendous” phase and Governor Andrew Cuomo predicting New York -- after reporting its most deaths in a day -- would soon reach the epidemic's apex. Meanwhile Italy, an epicenter of the outbreak in Europe, had the fewest daily fatalities since late March. Trump and Indian Prime Minister Narendra Modi held a phone call in which they “agreed to remain in touch on the issue of global supply chains for critical pharmaceuticals and medical supplies and to ensure they continue to function as smoothly as possible during the global health crisis,” White House spokesman Judd Deere said in a readout.

  • Coronavirus stimulus checks: When to expect up to $1,200, what you need to do, and more
    Business
    Yahoo Money

    Coronavirus stimulus checks: When to expect up to $1,200, what you need to do, and more

    Many Americans will get government checks up to $1,200 to help them financially weather job loss, reduced work hours, and other money challenges as the country tries to stem the spread of the coronavirus outbreak. When will the stimulus check arrive? Treasury Secretary Steven Mnuchin said at a White House briefing on Thursday, that those Americans who have signed up for direct deposit will receive their payment within two weeks.

  • 3 Oil Stocks to Profit From as Oil Prices Gush
    Business
    InvestorPlace

    3 Oil Stocks to Profit From as Oil Prices Gush

    Oil prices skyrocketed over 24% on Thursday, as black gold clinched its largest single-session percentage gain ever. The surge buoyed oil stocks and other energy-related industries, with many rising over 10%. Optimistic comments from President Donald Trump during a CNBC interview sparked the rally after he said he expected Russia and Saudi Arabia to slash oil production by 10 million to 15 million barrels.

  • With Traffic Down and Stores Closed, is it Time to Buy McDonald’s Stock?
    Business
    InvestorPlace

    With Traffic Down and Stores Closed, is it Time to Buy McDonald’s Stock?

    As the COVID-19 pandemic continues to affect our daily lives and the U.S. economy, investors are wondering if they should buy into shares of restaurant stocks in the second quarter. Year-to-date McDonald's (NYSE:MCD) stock is down about 18.2%. That decline compares to a 25% drop in the Consumer Discretionary Select Sector SPDR Fund (NYSEArca:XLY), which includes MCD as its third-largest holding at 7.39% of the portfolio, behind Amazon (NSADAQ:AMZN) at a whopping 24.1% and Home Depot (NYSE:HD) at 12% of the exchange-traded fund's assets.

  • Zoom stock: Privacy and China connection weigh on shares
    Business
    Insider Monkey

    Zoom stock: Privacy and China connection weigh on shares

    One of the few stocks that has benefited from the coronavirus pandemic is Zoom, although the stock is now under pressure due to privacy concerns. The shares climbed while most of the rest of the U.S. stock market plunged, but the news flow has shifted now. Zoom Video Communications Inc (NASDAQ: ZM) stock should not be confused with the stock for Zoom Technologies Inc., which trades under the ticker ZOOM on the over-the-counter market.

  • Trump: ‘There Will Be a Lot of Death Unfortunately’
    U.S.
    WSJ

    Trump: ‘There Will Be a Lot of Death Unfortunately’

    President Trump warned on Saturday that the coming days will be some of the worst for the coronavirus outbreak. Modeling shows New York, Detroit and New Orleans will hit the peak of their outbreaks in the next week. Photo: Bryan Smith/Zuma Press

  • Business
    TheStreet.com

    Depression Ahead: Cramer's 'Mad Money' Recap (Friday 4/3/20)

    Newlands said that when times get tough, consumers turn to brands they trust, and Constellation has many of the brands that consumers prefer. He said there has been a sizable channel shift in recent weeks, as consumers switch from drinking at restaurants, which are now closed, to taking their beer and wine home. When asked about inventory levels, Newlands said they have about 70 days of inventory on hand, but in many parts of the country, alcohol is considered essential, so their factories continue to operate and distribution remains strong.

  • Trump threatens tariffs on oil imports to 'protect' U.S. energy workers
    Politics
    Reuters

    Trump threatens tariffs on oil imports to 'protect' U.S. energy workers

    U.S. President Donald Trump said on Saturday he would impose tariffs on crude imports if he has to "protect" U.S. energy workers from the oil price crash that has been exacerbated by a war between Russia and Saudi Arabia over market share. "If I have to do tariffs on oil coming from outside or if I have to do something to protect our ... tens of thousands of energy workers and our great companies that produce all these jobs, I'll do whatever I have to do," Trump told reporters in a briefing about the coronavirus outbreak. Oil prices have dropped by about two-thirds this year as the pandemic crushes demand and as major producers Russia and Saudi Arabia boost output in a war over market share.

  • Weakness in Medtronic Stock Is Creating a Major Opportunity
    U.S.
    InvestorPlace

    Weakness in Medtronic Stock Is Creating a Major Opportunity

    The novel coronavirus crisis is creating a tremendous need for ventilators. Further, the company's sales for its cardiac and vascular unit, which houses its ventilator business, should climb meaningfully during the crisis. Given the high price of Medtronic's ventilators, there's an excellent chance that the company's profit margin on them is high.

  • Introducing Chesapeake Energy (NYSE:CHK), The Stock That Collapsed 99%
    Business
    Simply Wall St.

    Introducing Chesapeake Energy (NYSE:CHK), The Stock That Collapsed 99%

    For example, we sympathize with anyone who was caught holding Chesapeake Energy Corporation (NYSE:CHK) during the five years that saw its share price drop a whopping 99%. Shareholders have had an even rougher run lately, with the share price down 81% in the last 90 days. Given that Chesapeake Energy didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development.

  • ‘Quiet’ Warren Buffett has three ways to win in this market
    Business
    MarketWatch

    ‘Quiet’ Warren Buffett has three ways to win in this market

    At times like this it must be a relief to have some of your retirement portfolio managed by Warren Buffett. Granted, Buffett and Berkshire Hathaway Vice Chairman Charlie Munger aren't the spring chickens they were during the dot-com crash or the global financial crisis, when they were spry youngsters in their 70s and early 80s. The company press office says Buffett is not planning to speak in public before May.

  • After $50 Billion of Losses, No One Comes to Save the Mortgage Market
    Business
    Bloomberg

    After $50 Billion of Losses, No One Comes to Save the Mortgage Market

    In the week since, three top investors in the sector have engaged restructuring advisers, two others sold $7 billion of debt at a discount and publicly traded mortgage REITs in the U.S. lost more than $12 billion of market value, bringing total declines this year to at least $50 billion. Prominent asset managers including Blackstone Group Inc., TPG and Apollo Global Management Inc. have been sucked into the vortex wrought by the coronavirus pandemic, with their associated mortgage REITs losing more than two-thirds of their value on average so far in 2020.

  • Business
    Bloomberg

    Billionaire Esteves Warns of Severe Downturn and Leverage Danger

    The billionaire founder of Banco BTG Pactual SA predicted the economic downturn coming after the coronavirus pandemic will be worse than many expect and may cause stock markets to fall further. Investors and companies should avoid excessive leverage and currency mismatches, he said. “The good investor, the long-term winner, has to know what is the right kind of animal to hunt in the forest,” Esteves said on Friday on a broadcast hosted by BTG.

  • Barron's Picks And Pans: Post-Pandemic Ideas, Safe Dividends And More
    Business
    Benzinga

    Barron's Picks And Pans: Post-Pandemic Ideas, Safe Dividends And More

    How might Amazon.com, Inc. NASDAQ: AMZN), Home Depot Inc (NYSE: HD) and many others fare? Can Johnson & Johnson (NYSE: JNJ) or Procter & Gamble Co (NYSE: PG) weather the coronavirus crisis with payouts intact, if not higher?

  • Bulls And Bears Of The Week: Amazon, Boeing, Microsoft, Twitter And More
    Business
    Benzinga

    Bulls And Bears Of The Week: Amazon, Boeing, Microsoft, Twitter And More

    And investors are already bracing for big bank reports to kick off a new earnings season later this month. Benzinga continues to examine the prospects for many of the stocks most popular with investors. The following are some of this past week's most bullish and bearish posts that are worth another look.

  • Business
    Barrons.com

    If Your 401(k) Balance Is Small or Non-Existent, Fret Not. A New Paper Justifies Low Retirement Savings.

    Low- and middle-income workers who haven't been able to save much for retirement might not be as ill prepared as the financial punditry would have you believe, a finding that could help ease seniors' anxiety surrounding the adequacy of their post-work income. According to a recent paper via the National Bureau of Economic Research—titled “Can Low Retirement Savings Be Rationalized?”—the current meager returns from safe investments like bonds and certificates of deposit don't justify delaying consumption as they had when interest rates were higher. What's more, the paper's authors contend, the conventional wisdom on adequate retirement savings fails to account for declining consumption, meaning that those who can't save a lot in the first place may be able to get by with less in retirement.