{"id":17272,"date":"2025-06-25T21:22:43","date_gmt":"2025-06-25T21:22:43","guid":{"rendered":"https:\/\/finderica.com\/?p=17272"},"modified":"2025-06-25T21:22:43","modified_gmt":"2025-06-25T21:22:43","slug":"permian-resources-free-cash-flow-is-an-income-investors-dream","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=17272","title":{"rendered":"Permian Resources\u2019 Free Cash Flow Is an Income Investor\u2019s Dream"},"content":{"rendered":"
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Normally, when I talk about stocks and charts, I\u2019m referring to the ones that show the stock\u2019s price action.<\/p>\n

But today, I\u2019m showing you a chart that is so spectacular, you\u2019ll want to take a good look.<\/p>\n

\"Chart:<\/a><\/p>\n

This chart represents the free cash flow for oil and gas driller Permian Resources<\/strong> (NYSE: PR).<\/p>\n

You can see huge growth over the past few years. In 2025, free cash flow is forecast to increase by another 13%.<\/p>\n

The stock currently yields 4.2% and its free cash flow growth is an important part of determining if the dividend is safe.<\/p>\n

Let\u2019s look at some of the other elements.<\/p>\n

Last year, the company paid $467 million in dividends, for a low payout ratio of 35%. This year, dividends paid is expected to more than double to $1 billion. If the company achieves the $1.5 billion in free cash flow that is expected, the payout ratio will rise to 66% \u2013 which is still fine. I\u2019m comfortable with a payout ratio of 75% or lower for most companies.<\/p>\n

Permian Resources has a short but complicated dividend payment history.<\/p>\n

It only started paying one in the fourth quarter of 2022. It paid a dividend that was part fixed and part variable. For example, last year it paid a $0.06 fixed dividend and $0.15 variable in the second quarter.<\/p>\n

<\/a>Beginning in the fourth quarter of last year, the company eliminated the variable dividend but raised the fixed payout to $0.15 per share.<\/p>\n

One could argue that a decline from $0.21 in fixed plus variable dividends to $0.15 is a cut, but I\u2019ve always viewed variable dividends as uncertain. In fact, if the company still paid a variable dividend the likelihood of a cut would be much higher since variable dividends almost always fall at some point.<\/p>\n

But by moving to a fixed dividend, the company is expressing confidence in its ability to return capital to shareholders at a steady rate.<\/p>\n

Given the strong free cash flow growth, the acceptable payout ratio, and a dividend plan that has been stabilized, Permian Resources dividend has a very low risk of being cut.<\/p>\n

Dividend Safety Rating: A<\/strong><\/p>\n

What stock\u2019s dividend safety would you like me to analyze next? Let me know in the comments section below.<\/p>\n

\"Dividend<\/p>\n<\/p><\/div>\n