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Woodside Energy Group (ASX:WDS) Could Be A Buy For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Woodside Energy Group Ltd (ASX:WDS) is about to go ex-dividend in just two days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Woodside Energy Group's shares before the 8th of September in order to be eligible for the dividend, which will be paid on the 6th of October.

The company's next dividend payment will be US$1.09 per share, on the back of last year when the company paid a total of US$2.18 to shareholders. Based on the last year's worth of payments, Woodside Energy Group has a trailing yield of 9.1% on the current stock price of A$35.08. If you buy this business for its dividend, you should have an idea of whether Woodside Energy Group's dividend is reliable and sustainable. As a result, readers should always check whether Woodside Energy Group has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Woodside Energy Group

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. Woodside Energy Group paid out 68% of its earnings to investors last year, a normal payout level for most businesses. 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. Fortunately, it paid out only 42% of its free cash flow in the past year.

It's positive to see that Woodside Energy Group'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.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Woodside Energy Group's earnings per share have been growing at 11% a year for the past five years. Woodside Energy Group has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Woodside Energy Group has increased its dividend at approximately 7.1% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Woodside Energy Group an attractive dividend stock, or better left on the shelf? Woodside Energy Group's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Woodside Energy Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Woodside Energy Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To that end, you should learn about the 3 warning signs we've spotted with Woodside Energy Group (including 2 which don't sit too well with us).

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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