Canadian Utilities (TSE:CU) Has Affirmed Its Dividend Of CA$0.4531

The board of Canadian Utilities Limited (TSE:CU) has announced that it will pay a dividend on the 1st of December, with investors receiving CA$0.4531 per share. Based on this payment, the dividend yield will be 5.0%, which is fairly typical for the industry.

Check out our latest analysis for Canadian Utilities

Canadian Utilities' Future Dividends May Potentially Be At Risk

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Canadian Utilities was paying out quite a large proportion of both earnings and cash flow, with the dividend being 97% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Looking forward, EPS could fall by 9.9% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 108%, which could put the dividend under pressure if earnings don't start to improve.

Canadian Utilities Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of CA$1.07 in 2014 to the most recent total annual payment of CA$1.81. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Canadian Utilities' EPS has declined at around 9.9% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Canadian Utilities' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Canadian Utilities' payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Canadian Utilities is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Canadian Utilities that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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