Ameren (NYSE:AEE) Is Paying Out A Larger Dividend Than Last Year
Ameren Corporation (NYSE:AEE) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of March to $0.67. Based on this payment, the dividend yield for the company will be 3.7%, which is fairly typical for the industry.
See our latest analysis for Ameren
Ameren's Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Ameren'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.
The next year is set to see EPS grow by 19.5%. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.
Ameren Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was $1.60, compared to the most recent full-year payment of $2.68. This means that it has been growing its distributions at 5.3% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
We Could See Ameren's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Ameren has grown earnings per share at 5.3% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.
Our Thoughts On Ameren's Dividend
Overall, we always like to see the dividend being raised, but we don't think Ameren will make a great income stock. While Ameren is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Ameren (1 is concerning!) 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.
