Caribbean Utilities Company (TSE:CUP.U) Has Affirmed Its Dividend Of $0.185

The board of Caribbean Utilities Company, Ltd. (TSE:CUP.U) has announced that it will pay a dividend of $0.185 per share on the 15th of September. This makes the dividend yield 5.3%, which will augment investor returns quite nicely.

Check out our latest analysis for Caribbean Utilities Company

Caribbean Utilities Company's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Caribbean Utilities Company's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. We think that this practice can make the dividend quite risky in the future.

The next year is set to see EPS grow by 6.1%. If the dividend continues on this path, the payout ratio could be 68% by next year, which we think can be pretty sustainable going forward.

Caribbean Utilities Company Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of $0.68 in 2017 to the most recent total annual payment of $0.74. This works out to be a compound annual growth rate (CAGR) of approximately 1.2% a year over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Caribbean Utilities Company has only grown its earnings per share at 3.4% per annum over the past five years. Caribbean Utilities Company's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

Our Thoughts On Caribbean Utilities Company's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Caribbean Utilities Company's payments, as there could be some issues with sustaining them into the future. While Caribbean Utilities Company is earning enough to cover the payments, the cash flows are lacking. We don't think Caribbean Utilities Company is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Caribbean Utilities Company (1 can't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.