CMS Energy Corporation (NYSE:CMS) Pays A US$0.515 Dividend In Just Four Days

CMS Energy Corporation (NYSE:CMS) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase CMS Energy's shares before the 9th of February in order to receive the dividend, which the company will pay on the 29th of February.

The company's next dividend payment will be US$0.515 per share, on the back of last year when the company paid a total of US$2.06 to shareholders. Last year's total dividend payments show that CMS Energy has a trailing yield of 3.6% on the current share price of US$57.77. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for CMS Energy

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. CMS Energy paid out 65% of its earnings to investors last year, a normal payout level for most businesses.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see CMS Energy earnings per share are up 5.2% per annum over the last five years. Decent historical earnings per share growth suggests CMS Energy has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, CMS Energy has increased its dividend at approximately 7.3% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is CMS Energy an attractive dividend stock, or better left on the shelf? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. We think this is a pretty attractive combination, and would be interested in investigating CMS Energy more closely.

While it's tempting to invest in CMS Energy for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for CMS Energy you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.