Four Days Left Until ConocoPhillips (NYSE:COP) Trades Ex-Dividend
It looks like ConocoPhillips (NYSE:COP) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. In other words, investors can purchase ConocoPhillips' shares before the 16th of November in order to be eligible for the dividend, which will be paid on the 1st of December.
The company's next dividend payment will be US$0.93 per share, on the back of last year when the company paid a total of US$3.72 to shareholders. Based on the last year's worth of payments, ConocoPhillips has a trailing yield of 2.7% on the current stock price of US$135.59. 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! So we need to investigate whether ConocoPhillips can afford its dividend, and if the dividend could grow.
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 ConocoPhillips paying out a modest 35% 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. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for ConocoPhillips
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see ConocoPhillips's earnings per share have dropped 6.1% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, ConocoPhillips has lifted its dividend by approximately 14% a year on average.
Final Takeaway
From a dividend perspective, should investors buy or avoid ConocoPhillips? ConocoPhillips has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, ConocoPhillips looks okay on this analysis, although it doesn't appear a stand-out opportunity.
So while ConocoPhillips looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, ConocoPhillips has 3 warning signs (and 1 which is significant) we think you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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