Transmissora Aliança de Energia Elétrica's (BVMF:TAEE11) Dividend Will Be Increased To R$1.13

Transmissora Aliança de Energia Elétrica S.A. (BVMF:TAEE11) will increase its dividend from last year's comparable payment on the 16th of May to R$1.13. This takes the annual payment to 5.9% of the current stock price, which is about average for the industry.

View our latest analysis for Transmissora Aliança de Energia Elétrica

Transmissora Aliança de Energia Elétrica Doesn't Earn Enough To Cover Its Payments

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last dividend, Transmissora Aliança de Energia Elétrica is earning enough to cover the payment, but then it makes up 110% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS is forecast to fall by 8.2%. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 97%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was R$2.31, compared to the most recent full-year payment of R$2.17. The dividend has shrunk at a rate of less than 1% a year over this period. 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.

Transmissora Aliança de Energia Elétrica Could Grow Its Dividend

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 Transmissora Aliança de Energia Elétrica has been growing its earnings per share at 5.0% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Transmissora Aliança de Energia Elétrica (2 shouldn't be ignored!) that you should be aware of before investing. Is Transmissora Aliança de Energia Elétrica not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.