Warrior Met Coal (NYSE:HCC) Is Increasing Its Dividend To $0.08

The board of Warrior Met Coal, Inc. (NYSE:HCC) has announced that the dividend on 26th of February will be increased to $0.08, which will be 14% higher than last year's payment of $0.07 which covered the same period. Even though the dividend went up, the yield is still quite low at only 1.9%.

View our latest analysis for Warrior Met Coal

Warrior Met Coal's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Warrior Met Coal's dividend was comfortably covered by both cash flow and earnings. 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 1.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 3.6%, which is in the range that makes us comfortable with the sustainability of the dividend.

Warrior Met Coal Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2017, the annual payment back then was $0.20, compared to the most recent full-year payment of $1.16. This means that it has been growing its distributions at 29% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Warrior Met Coal May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Warrior Met Coal's EPS was effectively flat over the past five years, which could stop the company from paying more every year. If Warrior Met Coal is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Warrior Met Coal's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Warrior Met Coal (of which 1 is significant!) you should know about. 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.