The board of Freeport-McMoRan Inc. (NYSE:FCX) has announced that it will pay a dividend of $0.15 per share on the 1st of May. Including this payment, the dividend yield on the stock will be 0.9%, which is a modest boost for shareholders' returns.

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Freeport-McMoRan's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last dividend was quite easily covered by Freeport-McMoRan's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 80.5%. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Freeport-McMoRan

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of $1.25 in 2015 to the most recent total annual payment of $0.30. This works out to a decline of approximately 76% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. We are encouraged to see that Freeport-McMoRan has grown earnings per share at 18% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Freeport-McMoRan Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 15 analysts we track are forecasting for Freeport-McMoRan for free with public analyst estimates for the company . Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.