Via Renewables (NASDAQ:VIA) Is Due To Pay A Dividend Of US$0.18

Via Renewables, Inc. (NASDAQ:VIA) will pay a dividend of US$0.18 on the 15th of June. Based on this payment, the dividend yield on the company's stock will be 9.6%, which is an attractive boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Via Renewables' stock price has reduced by 35% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for Via Renewables

Via Renewables Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Via Renewables was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

If the company can't turn things around, EPS could fall by 12.2% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 164%, which is definitely a bit high to be sustainable going forward.

Via Renewables Is Still Building Its Track Record

It is great to see that Via Renewables has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The first annual payment during the last 7 years was US$0.48 in 2015, and the most recent fiscal year payment was US$0.72. This implies that the company grew its distributions at a yearly rate of about 6.0% over that duration. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 12% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Via Renewables' payments, as there could be some issues with sustaining them into the future. While Via Renewables is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

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 2 warning signs for Via Renewables that investors should know about before committing capital to this stock. Is Via Renewables 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.