Solaris Energy Infrastructure (NYSE:SEI) Is Due To Pay A Dividend Of $0.12

The board of Solaris Energy Infrastructure, Inc. (NYSE:SEI) has announced that it will pay a dividend on the 13th of June, with investors receiving $0.12 per share. This payment means that the dividend yield will be 2.2%, which is around the industry average.

We've discovered 6 warning signs about Solaris Energy Infrastructure. View them for free.

Solaris Energy Infrastructure's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

According to analysts, EPS should be several times higher next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 12% which is fairly sustainable.

View our latest analysis for Solaris Energy Infrastructure

Solaris Energy Infrastructure Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of $0.40 in 2019 to the most recent total annual payment of $0.48. This means that it has been growing its distributions at 3.1% per annum over that time. Solaris Energy Infrastructure hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Solaris Energy Infrastructure has seen earnings per share falling at 9.5% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

An additional note is that the company has been raising capital by issuing stock equal to 53% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Solaris Energy Infrastructure's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 6 warning signs for Solaris Energy Infrastructure (3 don't sit too well with us!) that you should be aware of before investing. Is Solaris Energy Infrastructure not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.