Cabot Oil & Gas Corporation (NYSE:COG) has announced that it will be increasing its dividend on the 26th of August to US$0.11. Even though the dividend went up, the yield is still quite low at only 2.6%.

View our latest analysis for Cabot Oil & Gas

Cabot Oil & Gas' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. The last dividend was quite easily covered by Cabot Oil & Gas' earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 133.8% over the next year. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Cabot Oil & Gas Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.03 in 2011, and the most recent fiscal year payment was US$0.44. This works out to be a compound annual growth rate (CAGR) of approximately 31% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Cabot Oil & Gas has seen EPS rising for the last five years, at 51% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We Really Like Cabot Oil & Gas' Dividend

Overall, a dividend increase is always good, and we think that Cabot Oil & Gas is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Cabot Oil & Gas that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

This article by Simply Wall St is general in nature. 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.

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