Southwest Gas Holdings (NYSE:SWX) Is Paying Out A Dividend Of $0.62

The board of Southwest Gas Holdings, Inc. (NYSE:SWX) has announced that it will pay a dividend on the 1st of December, with investors receiving $0.62 per share. This means that the annual payment will be 4.3% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Southwest Gas Holdings

Southwest Gas Holdings' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Even in the absence of profits, Southwest Gas Holdings is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

EPS is set to grow by 197.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 90%, which is on the higher side, but certainly still feasible.

Southwest Gas Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.32 in 2013, and the most recent fiscal year payment was $2.48. This means that it has been growing its distributions at 6.5% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Southwest Gas Holdings' EPS has declined at around 31% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Southwest Gas Holdings' 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. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Southwest Gas Holdings you should be aware of, and 2 of them make us uncomfortable. Is Southwest Gas Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.