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Golar LNG (NASDAQ:GLNG) Has Announced A Dividend Of $0.25

Golar LNG Limited (NASDAQ:GLNG) has announced that it will pay a dividend of $0.25 per share on the 17th of June. This payment means that the dividend yield will be 3.9%, which is around the industry average.

See our latest analysis for Golar LNG

Golar LNG's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Golar LNG's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. Generally, we think that this would be a risky long term practice.

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The next year is set to see EPS grow by 57.3%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 50% which brings it into quite a comfortable range.

historic-dividend
historic-dividend

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $1.80 in 2014 to the most recent total annual payment of $1.00. The dividend has shrunk at around 5.7% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Golar LNG's Dividend Might Lack Growth

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Golar LNG has seen EPS rising for the last five years, at 55% per annum. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Golar LNG hasn't been doing.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Golar LNG has 2 warning signs (and 1 which can't be ignored) we think you should know about. Is Golar LNG not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.