SandRidge Energy, Inc. (NYSE:SD) will trade ex-dividend for the next 4 days. The ex-dividend date is a business day before a company’s record date, when the company determines which shareholders are entitled to a dividend. The ex-dividend date is significant because trading takes at least two business days each time a stock is bought or sold. Accordingly, SandRidge Energy investors who purchase the stock on or after August 16 will not receive the dividend, which will be paid on August 30.
The company’s next dividend payment will be $0.11 per share. Last year, the company paid out a total of $0.44 to shareholders. Calculating last year’s payments shows that SandRidge Energy has a yield of 3.6% on the current share price of $12.18. If you are buying this company for its dividend, you should have an idea of whether SandRidge Energy’s dividend is reliable and sustainable. So, we need to investigate whether SandRidge Energy can afford its dividend, and if the dividend might grow.
Check out our latest analysis for SandRidge Energy
Dividends are usually paid out of company earnings. If a company pays more in dividends than it generated in profit, the dividend may not be sustainable. So it’s good that SandRidge Energy pays out a modest 39% of its profit. But cash flows are even more important than profits when assessing a dividend, so we need to check whether the company generated enough cash to pay its distribution. Fortunately, dividend payments only represented 27% of the free cash flow generated, which is a comfortable payout ratio.
It’s positive to see that SandRidge 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 indicates a greater margin of safety before the dividend gets cut.
Click here to see how much of its profits SandRidge Energy paid out over the last 12 months.
Have earnings and dividends increased?
Companies with consistently growing earnings per share generally make the best dividend stocks because they usually have an easier time increasing dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It’s encouraging to see that SandRidge Energy has grown its earnings quickly, increasing 56% per year over the past five years. Earnings per share have grown very quickly, and the company pays out a relatively small percentage of its earnings and cash flow. Companies with growing earnings and low payout ratios are often the best dividend stocks over the long term because the company can both grow its earnings and increase the percentage of earnings it pays out, essentially multiplying the dividend.
Since SandRidge Energy has only been paying a dividend for a year, there is not much historical insight to look at.
The conclusion
Does SandRidge Energy have what it takes to maintain its dividend payments? SandRidge Energy has grown its earnings at a rapid pace and has a conservatively low payout ratio, meaning the company is reinvesting heavily in its business; an excellent combination. Overall, we think this combination is attractive and worth further investigation.
Although SandRidge Energy looks good from a dividend perspective, it is always worth staying informed about the risks of this stock. Every company has risks, and we have 2 warning signs for SandRidge Energy You should know about this.
A common mistake when investing is to buy the first interesting stock you see. Here you can find a complete list of high dividend stocks.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
