Williams Companies (NYSE:WMB) Has Re-Affirmed Its Dividend Of US$0.41
The Williams Companies, Inc. (NYSE:WMB) will pay a dividend of US$0.41 on the 28th of June. This means the annual payment is 5.9% of the current stock price, which is above the average for the industry.
View our latest analysis for Williams Companies
Williams Companies Is Paying Out More Than It Is Earning
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 170% of what it was earning and 83% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.
Over the next year, EPS is forecast to expand by 27.9%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 125%, which probably can't continue putting some pressure on the balance sheet.
Williams Companies 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 2011, the dividend has gone from US$0.50 to US$1.64. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Williams Companies Might Find It Hard To Grow Its Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Williams Companies has grown earnings per share at 22% per year over the past five years. While EPS is growing rapidly, Williams Companies paid out a very high 170% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Williams Companies is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Williams Companies that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
This article by Simply Wall St is general in nature. 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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