Last update on 2024-06-27

Patterson-UTI Energy (PTEN) - Dividend Analysis (Final Score: 5/8)

Patterson-UTI Energy's dividend analysis evaluates the stability and performance of their dividend policy using an 8-criteria scoring system. Final score: 5/8.

Short Analysis - Dividend Score: 5

We're running Patterson-UTI Energy (PTEN) 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 measures the annual dividends paid by a company relative to its share price. A higher yield can indicate that a stock is generating more income relative to its price, often making it more attractive to income-focused investors. However, an abnormally high yield could also signal potential risks, such as financial instability or a potential dividend cut.

Patterson-UTI Energy (PTEN) has a current dividend yield of 2.963%, significantly higher than the industry average of 1.07%. This high yield likely makes PTEN attractive to dividend investors. The yield has varied greatly, reaching a high of 5.2129% in 2008 during turbulent stock price periods. Throughout the years, PTEN's yield has generally maintained levels above the industry average, suggesting consistency and reliability in dividend payments. High dividend yields over many years may reflect the company’s strong profit distribution policies, but also hint at stock price volatility. Given the company's historical data, this current 2.963% yield is relatively high and could be seen as favorable, albeit with some caution due to potential risk factors reflected in historical volatility.

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

The dividend growth rate measures the annualized percentage rate of growth of a company's dividend payments. A growth rate higher than 5% over the years can indicate strong company performance and shareholder value creation.

Based on the provided data, Patterson-UTI Energy's (PTEN) dividend growth rate has been highly volatile over the past 20 years with significant fluctuations. Only 11 out of 20 years recorded positive growth rates, with substantial dips in the years 2009, 2016, and 2017. Averages show a 24.99% growth rate, driven by particularly high growth spikes in 2005, 2015, and 2023. While the average is above 5%, the inconsistency and negative growth years suggest a lack of stable dividend policy, which could be concerning for long-term investors seeking reliable dividend streams. Therefore, this trend could be seen as unfavorable in the context of stability and predictability.

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

The dividend payout ratio measures the proportion of earnings a company pays to shareholders as dividends. It's important to consider the payout ratio to assess dividend sustainability.

Over the last 20 years, Patterson-UTI Energy has an average payout ratio of approximately 17.47%, well within the desired range of being lower than 65%. This suggests that the company maintains a conservative approach to dividend payments, ensuring they are sustainable over time. In individual years, there have been fluctuations, including negative values, which often indicate years of net losses or exceptionally high dividends during income deficits. Particularly noteworthy is 2017, where the payout ratio spiked to over 270%, indicating a year where dividends were paid despite poor earnings."}

Dividends Well Covered by Earnings?

Dividends are typically paid out of company earnings. For dividends to be sustainable, the company must generate sufficient earnings to cover them.

The trend in EPS and DPS over the years for Patterson-UTI Energy exhibits significant volatility. From 2003 to 2008, earnings were positive and sufficient to cover dividends. However, during economic downturns, such as post-2008 and particularly from 2015 onwards, the company recorded negative EPS (i.e., earnings losses), inherently making dividend coverage by earnings negative. Notably, in 2017, despite low EPS, the company managed high dividend coverage ratio (2.70), indicating the EPS spiked, possibly due to unusual gains. Years 2019-2021 show sustained negative EPS with small dividend payouts, highlighting weak operational performance. Improvements in EPS from 2022 and further positive EPS in 2023 are promising, the dividend-to-earnings coverage ratios of 0.28 and 0.36 respectively, indicating recovery. Though recent trends show better balance of earnings yet cautious dividend distribution, historical instability cautions this optimism. Fundamentally for PTEN, evaluating both cyclical industry impacts and consistent earning generation dictates cautious dividend strategies moving forwards.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

Analyzing the Free Cash Flow and the Dividend Payout Amount for Patterson-UTI Energy from 2003 to 2023, we need to assess if the company's dividends are adequately covered by its cash flow. Free Cash Flow (FCF) is crucial because it indicates the amount of cash generated by the company's operations after capital expenditures, which can be used for paying dividends. A coverage ratio above 1 indicates that the dividends are well-covered by FCF, reflecting good financial health and investment quality. For PTEN, some years exhibit strong coverage (such as 2009 with an astronomical ratio due to low dividends and high FCF), while others, like 2015 and 2021, show negative or inadequate coverage, suggesting instability in dividend payments from cash flow. Particularly concerning are the negative ratios in 2010, 2011, and 2015, signaling challenges in maintaining dividend payments. However, notable recoveries in subsequent years to positive ratios above 0.3, such as in 2018 and 2022, demonstrate periodic resilience.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Patterson-UTI Energy (PTEN) and why it is important to consider

Stability in dividend payments signals financial health and reliability, particularly important for income-seeking investors who depend on these payouts for regular income. Companies that can maintain or grow their dividends during economic downturns demonstrate resilience and strong cash flow. Upon reviewing the dividend history for Patterson-UTI Energy (PTEN) over the past 20 years, we note significant fluctuations. Notable droughts in dividends occurred, such as in the years 2009, from $0.60 to $0.20—a significant 67% decrease, and in 2014 from $0.40 to $0.16, marking a 60% reduction. Other substantial drops are observed in 2017 (from $0.16 to $0.08), 2019 (from $0.18 to $0.16), and 2020 ($0.10). With several instances of drops exceeding 20%, this indicates volatility and might be concerning for stability-focused investors. While the recent trend suggests some recovery, the historic inconsistency could be a point of caution.

Dividends Paid for Over 25 Years?

Examining if a company has paid dividends consistently for over 25 years is crucial for investors seeking stable and reliable dividend income.

Based on the data provided for Patterson-UTI Energy (PTEN), the company has not paid dividends for over 25 consecutive years. The dividend payments began only in 2004. While the company has shown a commitment to returning capital to shareholders since 2004, the inconsistency in the dividend amounts and the fact that they have not been doing this for 25 years makes it less appealing for long-term dividend investors. Stability and a track record of consistently increasing dividends are key factors, and in this case, PTEN does not fully meet the criteria, making this a weak trend.

Reliable Stock Repurchases Over the Past 20 Years?

Analyzing reliable stock repurchases over a long period helps investors understand a company's commitment to returning value to shareholders.

Over the past 20 years, Patterson-UTI Energy (PTEN) has demonstrated reliable stock repurchases in 8 out of these 20 years, representing 40% reliability. Notably, significant buybacks occurred in the years 2006, 2007, 2008, 2009, 2012, 2013, 2019, and 2020. The average repurchase rate of 3.2063 indicates a somewhat cautious but recurrent strategy to return capital to shareholders. Although the buybacks show consistency in certain periods, the overall trend exhibits both increases and decreases in share count at different instances, which might be influenced by various strategic decisions or market conditions. Overall, while there is evidence of shareholder-friendly practices, the sporadic nature may not fully qualify as 'highly reliable' when compared to companies with more consistent buyback policies on an annual basis.