Avangrid (NYSE:AGR) Has Announced A Dividend Of $0.44

The board of Avangrid, Inc. (NYSE:AGR) has announced that it will pay a dividend on the 2nd of October, with investors receiving $0.44 per share. This means the dividend yield will be fairly typical at 4.5%.

See our latest analysis for Avangrid

Avangrid's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Before this announcement, Avangrid was paying out 100% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Over the next year, EPS is forecast to expand by 37.5%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 76% which is a bit high but can definitely be sustainable.

Avangrid Is Still Building Its Track Record

Avangrid's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2016, the annual payment back then was $1.73, compared to the most recent full-year payment of $1.76. Dividend payments have been growing, but very slowly over the period. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Avangrid has seen EPS rising for the last five years, at 7.1% per annum. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Avangrid's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Avangrid that you should be aware of before investing. Is Avangrid not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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