Yahoo Finance Peabody Energy's (NYSE:BTU) Dividend Will Be $0.075
Peabody Energy Corporation's (NYSE:BTU) investors are due to receive a payment of $0.075 per share on 4th of September. Including this payment, the dividend yield on the stock will be 1.4%, which is a modest boost for shareholders' returns.
See our latest analysis for Peabody Energy
Peabody Energy's Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Peabody Energy was paying a whopping 127% as a dividend, but this only made up 7.0% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Over the next year, EPS is forecast to fall by 23.8%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 6.5%, which is comfortable for the company to continue in the future.
Peabody Energy's Dividend Has Lacked Consistency
Peabody Energy has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the dividend has gone from $0.46 total annually to $0.30. The dividend has shrunk at around 6.9% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend's Growth Prospects Are Limited
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. However, Peabody Energy's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While growth may be thin on the ground, Peabody Energy could always pay out a higher proportion of earnings to increase shareholder returns.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Peabody Energy's payments, as there could be some issues with sustaining them into the future. While Peabody Energy is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Peabody Energy (1 is a bit unpleasant!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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