The board of Matador Resources Company (NYSE:MTDR) has announced that it will be increasing its dividend by 25% on the 6th of December to $0.25, up from last year's comparable payment of $0.20. This takes the annual payment to 1.6% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Matador Resources

Matador Resources' Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, Matador Resources' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 17.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which is in the range that makes us comfortable with the sustainability of the dividend.

Matador Resources Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2020, the annual payment back then was $0.10, compared to the most recent full-year payment of $0.80. This implies that the company grew its distributions at a yearly rate of about 68% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Matador Resources has been growing its earnings per share at 38% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Matador Resources' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

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 instance, we've picked out 3 warning signs for Matador Resources that investors should take into consideration. Is Matador Resources not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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