California Resources (NYSE:CRC) Will Pay 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. Despite this raise, the dividend yield of 2.7% is only a modest boost to shareholder returns.

Check out our latest analysis for California Resources

California Resources' Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, California Resources was easily earning enough to cover the dividend. 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 fall by 31.4% over the next year. 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 Is Still Building Its Track Record

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 Is Doubtful

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. California Resources has seen earnings per share falling at 5.6% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

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.

In Summary

Overall, we always like to see the dividend being raised, but we don't think California Resources will make a great income stock. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.