California Resources (NYSE:CRC) Has Announced A Dividend Of $0.3875

The board of California Resources Corporation (NYSE:CRC) has announced that it will pay a dividend on the 16th of December, with investors receiving $0.3875 per share. Although the dividend is now higher, the yield is only 2.7%, which is below the industry average.

See our latest analysis for California Resources

California Resources' Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, California Resources' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 30.7%. If the dividend continues along recent trends, we estimate the payout ratio could be 41%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

California Resources Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2021, the annual payment back then was $0.68, compared to the most recent full-year payment of $1.55. This implies that the company grew its distributions at a yearly rate of about 32% over that duration. California Resources has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. California Resources has seen earnings per share falling at 5.6% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

We should note that California Resources has issued stock equal to 34% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On California Resources' Dividend

In summary, while it's always good to see the dividend being raised, we don't think California Resources' payments are rock solid. 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 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. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for California Resources you should be aware of, and 1 of them doesn't sit too well with us. Is California Resources 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.