Patterson-UTI Energy (NASDAQ:PTEN) Is Due To Pay A Dividend Of $0.08

The board of Patterson-UTI Energy, Inc. (NASDAQ:PTEN) has announced that it will pay a dividend on the 15th of September, with investors receiving $0.08 per share. This makes the dividend yield 5.9%, which will augment investor returns quite nicely.

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Patterson-UTI Energy Might Find It Hard To Continue The Dividend

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Patterson-UTI Energy is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Analysts are expecting EPS to grow by 99.0% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The healthy cash flows are definitely a good sign though, so we wouldn't panic just yet, especially with the earnings growing.

Check out our latest analysis for Patterson-UTI Energy

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from $0.40 total annually to $0.32. Doing the maths, this is a decline of about 2.2% 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.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Patterson-UTI Energy has been growing its earnings per share at 28% a year over the past five years. Even though the company is not profitable, it is growing at a solid clip. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.

Our Thoughts On Patterson-UTI Energy's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Patterson-UTI Energy that investors should take into consideration. 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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