Cactus (NYSE:WHD) Has Announced That It Will Be Increasing Its Dividend To $0.14

The board of Cactus, Inc. (NYSE:WHD) has announced that the dividend on 18th of September will be increased to $0.14, which will be 7.7% higher than last year's payment of $0.13 which covered the same period. Even though the dividend went up, the yield is still quite low at only 1.3%.

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Cactus' Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Cactus' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 44.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Cactus

Cactus Is Still Building Its Track Record

It is great to see that Cactus has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2019, the annual payment back then was $0.36, compared to the most recent full-year payment of $0.52. This means that it has been growing its distributions at 6.3% per annum over that time. Cactus has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Cactus has impressed us by growing EPS at 15% 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.

Cactus Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for Cactus for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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