Right here within the Security Internet column, we sometimes analyze the protection of an organization’s dividend.
However right now, we’re doing one thing totally different.
We’re going to take a look at an organization that has eradicated its dividend to see whether or not shareholders ought to have any hope of it being reinstated.
Comstock Assets (NYSE: CRK) is an impartial pure fuel producer in Louisiana and Texas.
In 2022, the corporate generated $630 million in free money circulation whereas paying out $51 million in dividends. Final 12 months, free money circulation swung to -$408 million, however Comstock nonetheless paid almost $140 million in dividends.
In consequence, the corporate introduced in February that it was suspending its dividend.
The outflow of money ought to enhance this 12 months, nevertheless it’s nonetheless anticipated to be nicely into the unfavourable at -$159 million.
Comstock paid a dividend in 2013 and 2014 however eradicated it when free money circulation dried up. The corporate didn’t revive the dividend till 2022, when it was money circulation constructive once more. Then, when free money circulation slid again into the unfavourable in 2023, administration once more took the painful however accountable motion of eliminating the dividend.
I believe that if Comstock generates constructive free money circulation for greater than a 12 months, it would resume paying a dividend to shareholders. Nevertheless it received’t be a dividend that buyers can depend on, as a result of administration has proven it would wipe it out if the corporate is just not producing any money.
I wouldn’t anticipate a dividend from Comstock for at the least a 12 months and a half – possibly extra.
For the reason that firm doesn’t pay a dividend, there is no such thing as a security score. But when it did pay a dividend, its grade could be an F.
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