Comstock Resources, Inc. (NYSE:CRK) will pay a dividend of $0.125 on the 15th of December. Based on this payment, the dividend yield will be 3.8%, which is fairly typical for the industry.
Comstock Resources' Dividend Is Well Covered By Earnings
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Comstock Resources was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 10.7%. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.
Comstock Resources Is Still Building Its Track Record
It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Comstock Resources has seen EPS rising for the last five years, at 48% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
An additional note is that the company has been raising capital by issuing stock equal to 19% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
We Really Like Comstock Resources' Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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 example, we've picked out 3 warning signs for Comstock Resources that investors should know about before committing capital to this stock. Is Comstock Resources not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.