Yahoo Finance Coterra Energy Inc. (NYSE:CTRA) Passed Our Checks, And It's About To Pay A US$0.20 Dividend
Coterra Energy Inc. (NYSE:CTRA) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Coterra Energy investors that purchase the stock on or after the 25th of May will not receive the dividend, which will be paid on the 9th of June.
The company's next dividend payment will be US$0.20 per share, and in the last 12 months, the company paid a total of US$2.65 per share. Looking at the last 12 months of distributions, Coterra Energy has a trailing yield of approximately 8.6% on its current stock price of $25.63. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Coterra Energy
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Coterra Energy paying out a modest 48% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 54% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Coterra Energy's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Coterra Energy has grown its earnings rapidly, up 91% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Coterra Energy has increased its dividend at approximately 49% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Has Coterra Energy got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Coterra Energy paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Coterra Energy, and we would prioritise taking a closer look at it.
While it's tempting to invest in Coterra Energy for the dividends alone, you should always be mindful of the risks involved. We've identified 3 warning signs with Coterra Energy (at least 1 which makes us a bit uncomfortable), and understanding these should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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