ConocoPhillips (NYSE:COP) Is Paying Out A Dividend Of $0.78

ConocoPhillips' (NYSE:COP) investors are due to receive a payment of $0.78 per share on 2nd of June. Including this payment, the dividend yield on the stock will be 3.5%, which is a modest boost for shareholders' returns.

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ConocoPhillips' Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, ConocoPhillips' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 15.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

Check out our latest analysis for ConocoPhillips

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 an annual total of $2.76 in 2015 to the most recent total annual payment of $3.12. This means that it has been growing its distributions at 1.2% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. ConocoPhillips has seen EPS rising for the last five years, at 18% per annum. ConocoPhillips definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like ConocoPhillips' Dividend

Overall, we like to see the dividend staying consistent, and we think ConocoPhillips might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

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. Taking the debate a bit further, we've identified 1 warning sign for ConocoPhillips that investors need to be conscious of moving forward. 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.