Phillips 66 (NYSE:PSX) Will Pay A Dividend Of $1.05

Phillips 66 (NYSE:PSX) will pay a dividend of $1.05 on the 1st of March. This means the annual payment will be 2.9% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Phillips 66

Phillips 66's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Phillips 66's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 15.4% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 33%, which is comfortable for the company to continue in the future.

Phillips 66 Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from $1.25 total annually to $4.20. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

We Could See Phillips 66's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Phillips 66 has grown earnings per share at 6.6% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Phillips 66's Dividend

Overall, we like to see the dividend staying consistent, and we think Phillips 66 might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. To that end, Phillips 66 has 2 warning signs (and 1 which makes us a bit uncomfortable) 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.