Home Energy company Should you buy Coterra Energy Inc. (NYSE:CTRA) for its upcoming dividend?

Should you buy Coterra Energy Inc. (NYSE:CTRA) for its upcoming dividend?


Coterra Energy Inc. (NYSE:CTRA) is set to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you will not be on the company’s books as of the record date. Therefore, Coterra Energy investors who purchase the shares on or after November 15 will not receive the dividend, which will be paid on November 30.

The company’s next dividend is $0.68 per share, following the last 12 months when the company distributed a total of $2.72 per share to shareholders. Last year’s total dividend payouts show that Coterra Energy has a 9.9% yield on the current share price of $27.53. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! So we need to consider whether Coterra Energy can afford its dividend and whether the dividend could increase.

Check opportunities and risks within the US oil and gas industry.

Dividends are usually paid out of company profits. If a company pays out more dividends than it earns in profits, then the dividend could be unsustainable. That’s why it’s good to see Coterra Energy paying out a modest 43% of its profits. A useful secondary check may be to assess whether Coterra Energy has generated sufficient free cash flow to pay its dividend. Over the past year, it has paid out 61% of its free cash flow as dividends, within the usual range for most companies.

It is positive to see Coterra Energy’s dividend being covered by both earnings and cash flow, as this is generally a sign that the dividend is sustainable, and a lower payout ratio generally suggests a higher margin. security before the dividend is reduced.

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

NYSE: Historic CTRA Dividend November 11, 2022

Have earnings and dividends increased?

Companies with consistently rising earnings per share tend to create the best dividend-paying stocks because they generally find it easier to increase dividends per share. Investors love dividends, so if earnings fall and the dividend is cut, expect a stock to sell heavily at the same time. That’s why it’s heartening to see Coterra Energy’s profits soar, rising 40% annually over the past five years.

Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Coterra Energy has recorded dividend growth of 52% per year on average over the past 10 years. It’s exciting to see that earnings and dividends per share have grown rapidly over the past few years.

To sum up

Should investors buy Coterra Energy for the next dividend? From a dividend perspective, we are encouraged to see that earnings per share have increased, with the company paying out less than half of its earnings and just over half of its free cash flow. There’s a lot to like about Coterra Energy, and we’d prioritize a closer look.

Although it is tempting to invest in Coterra Energy just for the dividends, you should always be aware of the risks involved. Every business has risks, and we’ve spotted 1 warning sign for Coterra Energy you should know.

As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. Here is a curated list of attractive stocks that are strong dividend payers.

Valuation is complex, but we help make it simple.

Find out if Coterra Energy is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.