Liberty Energy (NYSE:LBRT) Will Pay A Larger Dividend Than Last Year At $0.07

The board of Liberty Energy Inc. (NYSE:LBRT) has announced that it will be increasing its dividend by 40% on the 20th of December to $0.07, up from last year's comparable payment of $0.05. Although the dividend is now higher, the yield is only 1.0%, which is below the industry average.

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 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Liberty Energy

Liberty Energy's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Liberty Energy's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 29.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 7.6%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Liberty Energy's Dividend Has Lacked Consistency

Looking back, Liberty Energy's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The payments haven't really changed that much since 5 years ago. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

We Could See Liberty Energy's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Liberty Energy has seen EPS rising for the last five years, at 8.3% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Liberty Energy 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 earnings easily cover the company's distributions, and the company is generating plenty of cash. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Liberty Energy (of which 1 shouldn't be ignored!) you should know about. 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.