Attention dividend hunters! CenterPoint Energy Inc (NYSE:CNP) will be distributing its dividend of US$0.28 per share on the 13 December 2018, and will start trading ex-dividend in 4 days time on the 14 November 2018. Is this future income a persuasive enough catalyst for investors to think about CenterPoint Energy as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
What Is A Dividend Rock Star?
It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically:
- It is paying an annual yield above 75% of dividend payers
- It has paid dividend every year without dramatically reducing payout in the past
- Its has increased its dividend per share amount over the past
- It can afford to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
CenterPoint Energy currently yields 3.9%, which is high for Integrated Utilities stocks. But the real reason CenterPoint Energy stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you’re investor who wants a robust cash inflow from your portfolio over a long period of time.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of CNP it has increased its DPS from $0.73 to $1.11 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
The company currently pays out 30% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect CNP’s payout to increase to 69% of its earnings, which leads to a dividend yield of 4.2%. However, EPS is forecasted to fall to $1.31 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Investors of CenterPoint Energy can continue to expect strong dividends from the stock. With its favorable dividend characteristics, if high income generation is still the goal for your portfolio, then CenterPoint Energy is one worth keeping around. However, given this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three key aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for CNP’s future growth? Take a look at our free research report of analyst consensus for CNP’s outlook.
- Valuation: What is CNP worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CNP is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.