Why It Might Not Make Sense To Buy Patterson-UTI Energy, Inc. (NASDAQ:PTEN) For Its Upcoming Dividend

By
Simply Wall St
Published
May 27, 2021
NasdaqGS:PTEN
Source: Shutterstock

Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Patterson-UTI Energy's shares before the 2nd of June in order to receive the dividend, which the company will pay on the 17th of June.

The company's next dividend payment will be US$0.02 per share, on the back of last year when the company paid a total of US$0.08 to shareholders. Looking at the last 12 months of distributions, Patterson-UTI Energy has a trailing yield of approximately 0.9% on its current stock price of $8.55. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Patterson-UTI Energy can afford its dividend, and if the dividend could grow.

See our latest analysis for Patterson-UTI Energy

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Patterson-UTI Energy paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Patterson-UTI Energy didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Luckily it paid out just 12% of its free cash flow last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NasdaqGS:PTEN Historic Dividend May 28th 2021

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Patterson-UTI Energy was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Patterson-UTI Energy has seen its dividend decline 8.8% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

We update our analysis on Patterson-UTI Energy every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Patterson-UTI Energy? It's hard to get used to Patterson-UTI Energy paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not that we think Patterson-UTI Energy is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that being said, if you're still considering Patterson-UTI Energy as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 2 warning signs for Patterson-UTI Energy that you should be aware of before investing in their shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you decide to trade Patterson-UTI Energy, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted


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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.


Simply Wall St character - Warren

Simply Wall St

Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.