Northern Oil and Gas' (NYSE:NOG) Shareholders Will Receive A Bigger Dividend Than Last Year

Northern Oil and Gas, Inc.'s (NYSE:NOG) dividend will be increasing from last year's payment of the same period to $0.42 on 31st of October. Based on this payment, the dividend yield for the company will be 4.4%, which is fairly typical for the industry.

Check out our latest analysis for Northern Oil and Gas

Northern Oil and Gas' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Northern Oil and Gas is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 48.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Northern Oil and Gas Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2021, the annual payment back then was $0.12, compared to the most recent full-year payment of $1.68. This works out to be a compound annual growth rate (CAGR) of approximately 141% a year over that time. Northern Oil and Gas 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.

Northern Oil and Gas May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 3.1% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Northern Oil and Gas has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Northern Oil and Gas' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Northern Oil and Gas is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 5 warning signs for Northern Oil and Gas (of which 1 is potentially serious!) 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.