CMS Energy (NYSE:CMS) Has Announced That It Will Be Increasing Its Dividend To $0.4875
CMS Energy Corporation (NYSE:CMS) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of May to $0.4875. This makes the dividend yield about the same as the industry average at 3.2%.
View our latest analysis for CMS Energy
CMS Energy's Earnings Easily Cover The Distributions
We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, CMS Energy was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
The next year is set to see EPS grow by 26.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which is in the range that makes us comfortable with the sustainability of the dividend.
CMS Energy Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.96 in 2013, and the most recent fiscal year payment was $1.95. This implies that the company grew its distributions at a yearly rate of about 7.3% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. CMS Energy has seen EPS rising for the last five years, at 11% 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 CMS Energy's Dividend
In summary, while it's always good to see the dividend being raised, we don't think CMS Energy'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.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, CMS Energy has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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.
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