ConocoPhillips (NYSE:COP) Is Increasing Its Dividend To $0.70

ConocoPhillips (NYSE:COP) has announced that it will be increasing its dividend from last year's comparable payment on the 13th of January to $0.70. The payment will take the dividend yield to 3.9%, which is in line with the average for the industry.

Check out the opportunities and risks within the US Oil and Gas industry.

ConocoPhillips' Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, ConocoPhillips' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 36.3% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 56%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $2.64 in 2012 to the most recent total annual payment of $4.99. This works out to be a compound annual growth rate (CAGR) of approximately 6.6% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. ConocoPhillips might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. ConocoPhillips has impressed us by growing EPS at 30% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

ConocoPhillips Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for ConocoPhillips you should be aware of, and 1 of them is potentially serious. Is ConocoPhillips not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.