Warrior Met Coal, Inc. (NYSE:HCC) has announced that it will pay a dividend of $0.08 per share on the 12th of May. This payment means the dividend yield will be 1.7%, which is below the average for the industry.
Warrior Met Coal's Future Dividend Projections Appear Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Warrior Met Coal is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Over the next year, EPS is forecast to expand by 46.6%. If the dividend continues on this path, the payout ratio could be 5.0% by next year, which we think can be pretty sustainable going forward.
Check out our latest analysis for Warrior Met Coal
Warrior Met Coal's Dividend Has Lacked Consistency
Warrior Met Coal has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2017, the annual payment back then was $0.20, compared to the most recent full-year payment of $0.82. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
Warrior Met Coal May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Warrior Met Coal has seen earnings per share falling at 4.1% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Warrior Met Coal (of which 1 is potentially serious!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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