CenterPoint Energy's (NYSE:CNP) Upcoming Dividend Will Be Larger Than Last Year's
CenterPoint Energy, Inc.'s (NYSE:CNP) dividend will be increasing from last year's payment of the same period to $0.23 on 12th of March. This takes the annual payment to 2.4% of the current stock price, which unfortunately is below what the industry is paying.
CenterPoint Energy's Payment Could Potentially Have Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. 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. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Over the next year, EPS is forecast to expand by 39.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.
View our latest analysis for CenterPoint Energy
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from $0.99 total annually to $0.92. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that CenterPoint Energy has been growing its earnings per share at 20% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think CenterPoint Energy's payments are rock solid. While CenterPoint Energy is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, CenterPoint Energy has 2 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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