Texas Pacific Land's (NYSE:TPL) Shareholders Will Receive A Bigger Dividend Than Last Year

Texas Pacific Land Corporation's (NYSE:TPL) dividend will be increasing from last year's payment of the same period to $3.50 on 15th of March. Even though the dividend went up, the yield is still quite low at only 0.9%.

Check out our latest analysis for Texas Pacific Land

Texas Pacific Land's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Texas Pacific Land's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 59.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was $0.25 in 2014, and the most recent fiscal year payment was $14.00. This implies that the company grew its distributions at a yearly rate of about 50% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Texas Pacific Land has been growing its earnings per share at 14% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Texas Pacific Land's Dividend

Overall, a dividend increase is always good, and we think that Texas Pacific Land is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend 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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Texas Pacific Land stock. 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.