Matador Resources Company (NYSE:MTDR) will increase its dividend from last year's comparable payment on the 6th of December to $0.25. Although the dividend is now higher, the yield is only 1.9%, which is below the industry average.

Check out our latest analysis for Matador Resources

Matador Resources' Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, Matador Resources' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 20.2%. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.

Matador Resources Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2020, the dividend has gone from $0.10 total annually to $1.00. This implies that the company grew its distributions at a yearly rate of about 78% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Matador Resources has grown earnings per share at 34% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 example, we've picked out 3 warning signs for Matador Resources that investors should know about before committing capital to this stock. 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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