Occidental Petroleum Corporation's (NYSE:OXY) dividend will be increasing from last year's payment of the same period to $0.22 on 15th of April. This takes the annual payment to 1.5% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Occidental Petroleum

Occidental Petroleum's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Occidental Petroleum's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 37.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was $2.56 in 2014, and the most recent fiscal year payment was $0.88. Dividend payments have fallen sharply, down 66% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Occidental Petroleum May Find It Hard To Grow The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's not great to see that Occidental Petroleum's earnings per share has fallen at approximately 4.6% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Occidental Petroleum's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

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. Taking the debate a bit further, we've identified 2 warning signs for Occidental Petroleum that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.