Unitil's (NYSE:UTL) Upcoming Dividend Will Be Larger Than Last Year's

Unitil Corporation's (NYSE:UTL) periodic dividend will be increasing on the 28th of February to $0.405, with investors receiving 3.8% more than last year's $0.39. Based on this payment, the dividend yield for the company will be 3.1%, which is fairly typical for the industry.

See our latest analysis for Unitil

Unitil's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Unitil's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. 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.

Looking forward, earnings per share is forecast to rise by 16.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 53%, which is in the range that makes us comfortable with the sustainability of the dividend.

Unitil Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $1.38, compared to the most recent full-year payment of $1.56. This works out to be a compound annual growth rate (CAGR) of approximately 1.2% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unitil has seen EPS rising for the last five years, at 5.3% per annum. 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 Unitil's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Unitil's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. For example, we've identified 2 warning signs for Unitil (1 doesn't sit too well with us!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated 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.