Patterson-UTI Energy (NASDAQ:PTEN) Is Due To Pay A Dividend Of US$0.02

By
Simply Wall St
Published
May 28, 2021
NasdaqGS:PTEN
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Patterson-UTI Energy, Inc.'s (NASDAQ:PTEN) investors are due to receive a payment of US$0.02 per share on 17th of June. Including this payment, the dividend yield on the stock will be 1.0%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Patterson-UTI Energy

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

Even a low dividend yield can be attractive if it is sustained for years on end. Even though Patterson-UTI Energy isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS is forecast to rise by 27.9%. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.

historic-dividend
NasdaqGS:PTEN Historic Dividend May 29th 2021

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the first annual payment was US$0.20, compared to the most recent full-year payment of US$0.08. Doing the maths, this is a decline of about 8.8% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

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. Patterson-UTI Energy's EPS has fallen by approximately 18% per year during the past 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. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Patterson-UTI Energy's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Patterson-UTI 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Patterson-UTI Energy that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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This article by Simply Wall St is general in nature. 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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