Dividend Quality Analysis on Chesapeake Energy Corp. (NYSE:CHK)

The source of the company’s cash to support the dividend paid over the last twelve months is operating cash flow (coverage of 10.4x), investing cash flow (coverage of -25.8x), issuance cash flow (coverage of 16.4x) and twelve-month prior cash (coverage of 0.3x), for a total dividend coverage of 1.8x.

These coverage ratio factors imply that the firm’s net cash inflow from issuance was required (in addition to operating and investment cash) to pay the dividend, which suggests a medium dividend quality. CHK-US’s dividend quality is not in line with the majority of its peers, which comprise 1 high quality, 3 medium quality and 4 low quality.

CHK-US has paid a dividend in each of its last five years. The distribution of dividend quality over this period consists of 3 medium and 2 low. In particular, the dividends paid in the two most recent years were of medium quality. During this period, the medium quality dividend coverage has remained more or less stable at 2.2x relative to the prior year.