Liberty Energy's (NYSE:LBRT) Upcoming Dividend Will Be Larger Than Last Year's

Liberty Energy Inc. (NYSE:LBRT) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of December to $0.07. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Liberty Energy

Liberty Energy's Dividend Is Well Covered By Earnings

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, Liberty Energy was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 29.3%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 7.5%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Liberty Energy's Dividend Has Lacked Consistency

Liberty Energy has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of $0.20 in 2018 to the most recent total annual payment of $0.28. This means that it has been growing its distributions at 7.0% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Liberty Energy might have put its house in order since then, but we remain cautious.

We Could See Liberty Energy's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Liberty Energy has been growing its earnings per share at 8.3% a year over the past five years. Liberty Energy definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Liberty Energy's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Liberty Energy has 2 warning signs (and 1 which is a bit concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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