HF Sinclair Corporation's (NYSE:DINO) investors are due to receive a payment of $0.50 per share on 4th of September. This payment means that the dividend yield will be 4.7%, which is around the industry average.
HF Sinclair's Projections Indicate Future Payments May Be Unsustainable
Estimates Indicate HF Sinclair's Could Struggle to Maintain Dividend Payments In The Future
HF Sinclair's Future Dividends May Potentially Be At Risk
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. While HF Sinclair is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.
The next 12 months is set to see EPS grow by 156.2%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.
See our latest analysis for HF Sinclair
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $3.28 in 2015 to the most recent total annual payment of $2.00. This works out to be a decline of approximately 4.8% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Company Could Face Some Challenges Growing The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that HF Sinclair has been growing its earnings per share at 17% a year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for HF Sinclair that investors should know about before committing capital to this stock. Is HF Sinclair 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.