Select Water Solutions' (NYSE:WTTR) Dividend Will Be Increased To $0.07

Select Water Solutions, Inc. (NYSE:WTTR) has announced that it will be increasing its periodic dividend on the 15th of November to $0.07, which will be 17% higher than last year's comparable payment amount of $0.06. This makes the dividend yield about the same as the industry average at 2.2%.

View our latest analysis for Select Water Solutions

Select Water Solutions' Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Select Water Solutions' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 164.4% over the next year. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

Select Water Solutions Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The dividend has gone from an annual total of $0.20 in 2022 to the most recent total annual payment of $0.24. This works out to be a compound annual growth rate (CAGR) of approximately 9.5% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Select Water Solutions has been growing its earnings per share at 22% a year over the past five years. Select Water Solutions is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Select Water Solutions 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. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Select Water Solutions that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.