Yahoo Finance Adams Natural Resources Fund (NYSE:PEO) Has Affirmed Its Dividend Of $0.10
Adams Natural Resources Fund, Inc. (NYSE:PEO) has announced that it will pay a dividend of $0.10 per share on the 31st of May. This makes the dividend yield 5.7%, which will augment investor returns quite nicely.
View our latest analysis for Adams Natural Resources Fund
Adams Natural Resources Fund Is Paying Out More Than It Is Earning
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Adams Natural Resources Fund's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.
Earnings per share could rise by 46.6% over the next year if things go the same way as they have for the last few years. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 230% over the next year.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $1.88 in 2014 to the most recent total annual payment of $1.35. This works out to be a decline of approximately 3.3% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.
Adams Natural Resources Fund Might Find It Hard To Grow Its Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Adams Natural Resources Fund has grown earnings per share at 47% per year over the past five years. Although earnings per share is up nicely Adams Natural Resources Fund is paying out 355% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Adams Natural Resources Fund's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Adams Natural Resources Fund that investors need to be conscious of moving forward. 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.
