U.S. markets open in 1 hour 2 minutes
  • S&P Futures

    3,663.50
    +9.25 (+0.25%)
     
  • Dow Futures

    29,322.00
    +37.00 (+0.13%)
     
  • Nasdaq Futures

    11,256.25
    +28.00 (+0.25%)
     
  • Russell 2000 Futures

    1,689.60
    +7.50 (+0.45%)
     
  • Crude Oil

    80.39
    -0.84 (-1.03%)
     
  • Gold

    1,673.60
    +5.00 (+0.30%)
     
  • Silver

    18.93
    +0.22 (+1.19%)
     
  • EUR/USD

    0.9762
    -0.0058 (-0.59%)
     
  • 10-Yr Bond

    3.7470
    0.0000 (0.00%)
     
  • Vix

    31.58
    +1.40 (+4.64%)
     
  • GBP/USD

    1.1066
    -0.0057 (-0.52%)
     
  • USD/JPY

    144.6570
    +0.2140 (+0.15%)
     
  • BTC-USD

    19,416.66
    +22.63 (+0.12%)
     
  • CMC Crypto 200

    444.52
    -1.46 (-0.33%)
     
  • FTSE 100

    6,883.37
    +1.78 (+0.03%)
     
  • Nikkei 225

    25,937.21
    -484.84 (-1.83%)
     

CenterPoint Energy (NYSE:CNP) Is Increasing Its Dividend To US$0.17

·2 min read

CenterPoint Energy, Inc.'s (NYSE:CNP) dividend will be increasing to US$0.17 on 10th of March. Even though the dividend went up, the yield is still quite low at only 2.4%.

Check out our latest analysis for CenterPoint Energy

CenterPoint Energy Might Find It Hard To Continue The Dividend

Even a low dividend yield can be attractive if it is sustained for years on end. Despite not generating a profit, CenterPoint Energy is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Over the next year, EPS might fall by 27.7% based on recent performance. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

historic-dividend
historic-dividend

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from US$0.79 to US$0.68. The dividend has shrunk at around 1.5% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. CenterPoint Energy's earnings per share has shrunk at 28% a year over 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.

The company has also been raising capital by issuing stock equal to 15% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

CenterPoint Energy's Dividend Doesn't Look Great

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for CenterPoint Energy (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.