Evergy's (NASDAQ:EVRG) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Evergy, Inc. (NASDAQ:EVRG) has announced that it will be paying its dividend of $0.6675 on the 20th of December, an increased payment from last year's comparable dividend. This takes the annual payment to 4.3% of the current stock price, which is about average for the industry.

Check out our latest analysis for Evergy

Evergy's Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Evergy was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand by 19.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 62%, which is in the range that makes us comfortable with the sustainability of the dividend.

Evergy Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.36 in 2014, and the most recent fiscal year payment was $2.67. This means that it has been growing its distributions at 7.0% per annum 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.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Evergy has been growing its earnings per share at 8.1% 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.

Our Thoughts On Evergy's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Evergy's payments are rock solid. While Evergy is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Evergy (of which 1 makes us a bit uncomfortable!) you should know about. 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.