Stock Analysis

Patterson-UTI Energy (NASDAQ:PTEN) Has Announced A Dividend Of US$0.02

  •  Updated
NasdaqGS:PTEN
Source: Shutterstock

Patterson-UTI Energy, Inc. (NASDAQ:PTEN) has announced that it will pay a dividend of US$0.02 per share on the 16th of September. Including this payment, the dividend yield on the stock will be 1.0%, which is a modest boost for shareholders' returns.

View our latest analysis for Patterson-UTI Energy

Patterson-UTI Energy's Distributions May Be Difficult To Sustain

If it is predictable over a long period, even low dividend yields can be attractive. While Patterson-UTI Energy is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Looking forward, earnings per share is forecast to expand by 35.4% over the next year. It's encouraging to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

historic-dividend
NasdaqGS:PTEN Historic Dividend July 31st 2021

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was US$0.20 in 2011, and the most recent fiscal year payment was US$0.08. Doing the maths, this is a decline of about 8.8% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings per share has been sinking by 20% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Patterson-UTI Energy's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Patterson-UTI Energy that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

When trading Patterson-UTI Energy or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether Patterson-UTI Energy is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis