Expand Energy (NASDAQ:EXE) Has Affirmed Its Dividend Of $0.575

Expand Energy Corporation's (NASDAQ:EXE) investors are due to receive a payment of $0.575 per share on 27th of March. Including this payment, the dividend yield on the stock will be 2.5%, which is a modest boost for shareholders' returns.

View our latest analysis for Expand Energy

Expand Energy's Long-term Dividend Outlook appears Promising

If it is predictable over a long period, even low dividend yields can be attractive. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This is quite a strong warning sign that the dividend may not be sustainable.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 20%, which makes us pretty comfortable with the sustainability of the dividend.

Expand Energy's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 4 years was $1.38 in 2021, and the most recent fiscal year payment was $2.44. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Expand Energy has grown earnings per share at 68% per year over the past five years. While the company is not yet turning a profit, it is growing at a good rate. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

We should note that Expand Energy has issued stock equal to 78% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Expand Energy's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means Expand Energy has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think Expand Energy is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 2 warning signs for Expand Energy that investors need to be conscious of moving forward. Is Expand Energy 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.