Liberty Energy (NYSE:LBRT) Has Announced That It Will Be Increasing Its Dividend To $0.09

The board of Liberty Energy Inc. (NYSE:LBRT) has announced that it will be paying its dividend of $0.09 on the 18th of December, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.0%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Liberty Energy's stock price has increased by 57% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Liberty Energy's Future Dividends May Potentially Be At Risk

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Liberty Energy was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to fall by 86.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach over 200%, which could put the dividend in jeopardy if the company's earnings don't improve.

Check out our latest analysis for Liberty Energy

Liberty Energy's Dividend Has Lacked Consistency

Looking back, Liberty Energy's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 7 years was $0.20 in 2018, and the most recent fiscal year payment was $0.36. This works out to be a compound annual growth rate (CAGR) of approximately 8.8% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Liberty Energy has grown earnings per share at 46% 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.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Liberty Energy's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 5 warning signs for Liberty Energy (of which 1 is potentially serious!) you should know about. Is Liberty Energy 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.