Stock Analysis

Patterson-UTI Energy's (NASDAQ:PTEN) Dividend Will Be US$0.02

  •  Updated
NasdaqGS:PTEN
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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 1.1%, which is a modest boost for shareholders' returns.

See 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. Patterson-UTI Energy is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in 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.

Analysts are expecting EPS to grow by 34.6% over the next 12 months. 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.

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NasdaqGS:PTEN Historic Dividend August 14th 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 dividend has gone from US$0.20 in 2011 to the most recent annual payment of US$0.08. The dividend has shrunk at around 8.8% a year during that period. 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 Dividend Has Limited Growth Potential

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. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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