Yahoo Finance CenterPoint Energy (NYSE:CNP) Is Increasing Its Dividend To $0.19
CenterPoint Energy, Inc. (NYSE:CNP) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of March to $0.19. Even though the dividend went up, the yield is still quite low at only 2.4%.
Check out our latest analysis for CenterPoint Energy
CenterPoint Energy's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, CenterPoint Energy's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
The next year is set to see EPS grow by 17.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, 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 $0.81 in 2013, and the most recent fiscal year payment was $0.76. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. A company that decreases its dividend over time generally isn't what we are looking for.
CenterPoint Energy May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, CenterPoint Energy's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.9% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
Our Thoughts On CenterPoint Energy's Dividend
Overall, we always like to see the dividend being raised, but we don't think CenterPoint Energy will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, CenterPoint Energy has 3 warning signs (and 1 which is a bit concerning) we think you should know about. Is CenterPoint Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
