CGE Transmisión's (SNSE:CGET) Shareholders Will Receive A Smaller Dividend Than Last Year

CGE Transmisión S.A.'s (SNSE:CGET) dividend is being reduced by 12% to CLP5.70 per share on 8th of May, in comparison to last year's comparable payment of CLP6.50. The yield is still above the industry average at 7.6%.

CGE Transmisión's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, CGE Transmisión was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 3.3% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 27%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Check out our latest analysis for CGE Transmisión

CGE Transmisión Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2023, the annual payment back then was CLP6.17, compared to the most recent full-year payment of CLP6.50. This implies that the company grew its distributions at a yearly rate of about 2.6% over that duration. CGE Transmisión hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

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, initial appearances might be deceiving. It's not great to see that CGE Transmisión's earnings per share has fallen at approximately 3.3% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On CGE Transmisión's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for CGE Transmisión that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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