SM Energy (NYSE:SM) Has Announced A Dividend Of $0.15

The board of SM Energy Company (NYSE:SM) has announced that it will pay a dividend of $0.15 per share on the 6th of November. The dividend yield is 1.5% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for SM Energy

SM Energy's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, SM Energy's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 21.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 9.0%, which we are pretty comfortable with and we think is feasible on an earnings basis.

SM Energy Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.10, compared to the most recent full-year payment of $0.60. This means that it has been growing its distributions at 20% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that SM Energy has grown earnings per share at 36% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like SM Energy's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for SM Energy (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.