Eversource Energy's (NYSE:ES) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Eversource Energy (NYSE:ES) has announced that it will be increasing its dividend by 5.2% on the 31st of March to $0.7525, up from last year's comparable payment of $0.715. This makes the dividend yield 5.0%, which is above the industry average.

See our latest analysis for Eversource Energy

Eversource Energy's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Eversource Energy's Could Struggle to Maintain Dividend Payments In The Future

Eversource Energy's Future Dividends May Potentially Be At Risk

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Even though Eversource Energy is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Earnings per share is forecast to rise by 146.2% over the next year. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Eversource Energy Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $1.57 total annually to $2.86. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Eversource Energy's EPS has fallen by approximately 23% per year during the past 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. 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.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Eversource Energy's payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Eversource Energy that you should be aware of before investing. 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.