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CenterPoint Energy (NYSE:CNP) Is Increasing Its Dividend To $0.22
CenterPoint Energy, Inc. (NYSE:CNP) has announced that it will be increasing its dividend from last year's comparable payment on the 13th of March to $0.22. Although the dividend is now higher, the yield is only 2.6%, which is below the industry average.
View our latest analysis for CenterPoint Energy
CenterPoint Energy's Future Dividend Projections Appear Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, CenterPoint Energy was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Over the next year, EPS is forecast to expand by 32.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was $0.95 in 2014, and the most recent fiscal year payment was $0.84. Doing the maths, this is a decline of about 1.2% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Has Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. CenterPoint Energy has impressed us by growing EPS at 6.3% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
Our Thoughts On CenterPoint Energy's Dividend
In summary, while it's always good to see the dividend being raised, we don't think CenterPoint Energy's payments are rock solid. While CenterPoint Energy is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, CenterPoint Energy has 3 warning signs (and 1 which makes us a bit uncomfortable) we think 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.
About NYSE:CNP
CenterPoint Energy
Operates as a public utility holding company in the United States.
Proven track record low.