Santos Ltd (ASX: STO) shares have been through plenty of ups and downs. While the Santos share price may be moving like a yo-yo, it's a good idea to look at how much dividend the business could pay.
As an oil and gas ASX share, movements in energy prices can have a big impact on the profitability and how much the company is able to send to shareholders.
So, let's first consider how much dividend income the business is actually expected to pay out this year.
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Dividend projections
According to Commsec, Santos could pay an annual dividend per share of 35.2 cents.
If the company were to pay that amount, it would amount to a dividend yield of 5%, excluding any franking credits.
But, keep in mind that dividends are not guaranteed. Plus, dividends from ASX resource shares are unlikely to be consistent because of the volatile nature of commodity prices.
In FY24, the Santos annual dividend per share is projected to decrease to 26.5 cents per share and then fall to 21.2 cents per share in FY25. In other words, this could be the best that it gets in terms of dividend income for the next few years.
Is the Santos share price worth buying at this level?
Santos is down over the last year, six months, and in 2023 to date. Investors haven't been excited by the ASX oil giant recently.
Interestingly, it does trade on a cheaper earnings multiple compared to Woodside Energy Group Ltd (ASX: WDS).
According to Commsec, Santos is valued at 7x FY23's estimated earnings and 8x FY24's estimated earnings.
Commsec numbers suggest that Woodside is valued at almost 10x FY23's estimated earnings and close to 11x FY24's estimated earnings.
There is widespread optimism by analysts on the prospects for Santos shares.
Of the analyst opinions that Commsec looks at, all 18 ratings are a buy, with no holds or sells.
What about recent results?
The company recently announced its update for the fourth quarter of 2022. It said that sales revenue was US$1.9 billion for the quarter, taking 2022 sales to US$7.8 billion – up 65% year over year.
It achieved an annual free cash flow of around US$3.6 billion, more than double the level of 2021. Fourth quarter free cash flow was US$930 million in the quarter. With some of its cash flow, it has been carrying out a share buyback.
With the Santos share price being close to a 52-week low, I think it's worth considering. However, I'm not confident about its earnings growth prospects over the rest of the decade, so it's not one on my watchlist at the moment.
