Last update on 2024-06-27

Coterra Energy (CTRA) - Dividend Analysis (Final Score: 4/8)

In-depth dividend analysis of Coterra Energy (CTRA) assessing performance and stability using an 8-criteria scoring system. Final Score: 4/8.

Short Analysis - Dividend Score: 4

We're running Coterra Energy (CTRA) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the annual dividend payment to shareholders as a percentage of the stock price. A higher dividend yield can indicate a well-performing company generating substantial cash flows and a strong return to shareholders.

At a current dividend yield of 4.5846%, Coterra Energy (CTRA) shows an impressive performance relative to its historical yield that has seen significant fluctuations. In the past 20 years, the yield varies from as low as 0.1548% in 2013 to a staggering 32.0524% in 2017, indicating periods of high disparity. When compared to the industry average, CTRA's current yield is notably lower given the industry's high average of 12.75% in 2023. This trend might be perceived as negative since it shows that the company is returning less to shareholders compared to its peers. Additionally, the high historical yields such as in 2017 might have been due to significant special dividends or periods of stock price drops, meaning we should interpret these peaks cautiously. Therefore, despite the positive yield historically, the current parity with the industry doesn’t favor CTRA particularly well in its sector.

Average annual Growth Rate higher than 5% in the last 20 years?

Dividend Growth Rate measures a company's dividend growth over time and indicates financial health and shareholder value.

The dividend growth rate for Coterra Energy (CTRA) shows extreme fluctuations over the last 20 years, which is abnormal and suggests volatility rather than consistent growth. The average dividend ratio of 560.72% is extraordinarily high but not indicative of sustained average growth due to drastic individual percentage changes, ranging from -97.27% to 11358.75%. While there are periods of high increases, the inconsistent trend and negative rates reflect poorly on long-term stability, indicating an unreliable growth pattern overall, which is harmful for income-focused investors.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio represents the percentage of earnings distributed to shareholders in the form of dividends. For many companies, maintaining a payout ratio below 65% is desirable as it suggests financial stability and a sustainable dividend policy. It allows the company to retain a significant portion of its earnings for reinvestment or to buffer cash flows during economically challenging periods.

Over the last 20 years, Coterra Energy (CTRA) has shown considerable instability in its payout ratio. Although many years fall well below the 65% threshold, with averages often even below 25%, there are critical outliers such as 2015 (4234.1801%) and recent years where the payout ratio is significantly turbulent. Particularly in 2020, we see a spike to 79.3966%, which indicates potential bumpy profitability or significant dividend payout issues. Negative payout ratios in 2014 and 2015 further complicate the picture, indicating potential operating losses those years. If we exclude such extraordinary fluctuations or non-recurring financial events, CTRA's general payout ratio remains reassuring for investors desiring consistent dividends. However, the overall average payout ratio of 219.21% over two decades clearly surpasses the ideal sub-65% ratio, signifying some cautionary flags for dividend consistency and company profitability. This overall trend might be concerning for conservative investors focused on sustainable and stable dividend payouts.

Dividends Well Covered by Earnings?

This criterion looks at whether a company's dividends are adequately supported by its earnings, ensuring sustainability.

Coterra Energy's earnings per share (EPS) and dividends per share (DPS) are crucial metrics for assessing dividend sustainability. The trend indicates that in earlier years, earnings did cover dividends but by a relatively small margin (e.g., 2003: 0.244, 2004: 0.059). This margin further decreased during challenging periods (e.g., 2015 EPS was negative, -0.2753 which invalidates dividend support). However, significantly high EPS in recent years (e.g., 2022: 5.1068 compared to 2023 DPS of 1.17 indicating a robust coverage) suggests improved profitability and potentially sustainable dividends. The recent improvement shows a good trend for meeting this criterion.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means that the company generates sufficient free cash flow to cover its dividend payouts, ensuring sustainability.

Analyzing the data provided for Coterra Energy (CTRA), we observe that from 2003 to 2023, the ratio of free cash flow to dividend payout has exhibited significant fluctuations. Notable negative values (e.g., -0.048 in 2006, -0.065 in 2008, -0.032 in 2011) highlight periods when the company did not generate enough free cash flow to cover dividends. However, more recent years show improvement, with coverage ratios consistently positive from 2015 onwards. In 2021, for instance, the ratio was 0.83, indicating stronger cash flow coverage. The overall trend indicates that while the early years were turbulent, recent periods show better cash flow management, making the dividend more sustainable. This trend is moving in a good direction for dividend investors.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Coterra Energy (CTRA) and why it is important to consider

Interpreting the trend of Coterra Energy's dividend per share over the past 20 years is crucial. Evaluating whether the company's dividend payments have remained stable, especially not experiencing a drop greater than 20%, is important for income-seeking investors who rely on these payments for consistent returns. Consistency in dividends often signals robust and predictable financial health. The data indicates that Coterra Energy's dividend per share has generally been on an upward trend with a significant increase starting from 2017. However, there was a notable spike in 2017 to $9.167 and then a return to more modest levels afterward. Interestingly, the dividends have never dropped by 20% or more year over year, which is a positive sign for dividend stability. Despite this spike in 2017 – which might be attributable to a special dividend or an extraordinary payout event – the overall trend shows that the company has maintained or increased its dividend payouts over the years. This trend is generally favorable for income-focused investors as it indicates reliable, if not growing, income from the company.

Dividends Paid for Over 25 Years?

This criterion examines if the company has consistently paid dividends for over 25 years, reflecting stability and commitment to shareholder returns.

Coterra Energy has paid dividends consistently from 1998 to 2023, covering a span of 26 years. This long-term commitment to dividend payments is a positive indicator of financial stability and shareholder value. The trend shows significant growth in dividends per share, particularly the sharp increase starting in 2017, reaching $2.49 in 2022. This indicates strong financial performance and surplus cash flow. Overall, this trend is excellent for investors seeking stable and growing returns.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases, or buybacks, refer to a company buying back its own shares from the marketplace. This is generally done to increase the value of remaining shares, reduce the number of available shares in the market, and improve financial ratios. Consistent buybacks can be a sign of a company's confidence in its future prospects and its commitment to returning value to shareholders.

The interpretation of Coterra Energy's stock repurchases over the last 20 years reveals a mixed strategy. The company executed share repurchases in specific years: 2006, 2007, 2010, 2014, 2015, 2018, 2019, 2020, and 2023. While it repurchased shares in these years, it also saw significant increases in total shares outstanding, notably in 2016 and 2021. An average repurchase effect performance of 4.1638 times indicates sporadic but impactful buyback activities. However, the significant increase in shares during some years might hint at major equity issuance which may be used for large acquisitions or capital raises. Such fluctuating trends might be seen as both positive for providing flexibility and confidence, yet a sign for further examination of consistency in shareholder reward strategies.