CenterPoint Energy (NYSE:CNP) Will Pay A Larger Dividend Than Last Year At $0.19

CenterPoint Energy, Inc. (NYSE:CNP) will increase its dividend from last year's comparable payment on the 8th of June to $0.19. This takes the annual payment to 2.5% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for CenterPoint Energy

CenterPoint Energy's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, CenterPoint Energy's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 8.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% 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. Since 2013, the dividend has gone from $0.81 total annually to $0.76. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

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. Earnings per share has been sinking by 17% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

CenterPoint Energy's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think CenterPoint Energy will make a great income stock. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for CenterPoint Energy you should be aware of, and 1 of them is potentially serious. Is CenterPoint Energy not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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