Northern Oil and Gas' (NYSE:NOG) Upcoming Dividend Will Be Larger Than Last Year's

The board of Northern Oil and Gas, Inc. (NYSE:NOG) has announced that it will be paying its dividend of $0.42 on the 31st of October, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 4.2%, which is in line with the average for the industry.

See our latest analysis for Northern Oil and Gas

Northern Oil and Gas' Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, Northern Oil and Gas 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.

Over the next year, EPS is forecast to expand by 48.3%. 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 Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 3 years was $0.12 in 2021, and the most recent fiscal year payment was $1.68. This means that it has been growing its distributions at 141% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 3.1% per annum over the last five years, which admittedly is a bit slow. If Northern Oil and Gas is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Northern Oil and Gas' Dividend

Overall, we always like to see the dividend being raised, but we don't think Northern Oil and Gas will make a great income stock. While Northern Oil and Gas is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Northern Oil and Gas has 5 warning signs (and 1 which is a bit unpleasant) we think 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.