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Is It Worth Considering Eversource Energy (NYSE:ES) For Its Upcoming Dividend?

Simply Wall St

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Eversource Energy (NYSE:ES) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 3rd of March, you won't be eligible to receive this dividend, when it is paid on the 31st of March.

Eversource Energy's next dividend payment will be US$0.57 per share, on the back of last year when the company paid a total of US$2.14 to shareholders. Based on the last year's worth of payments, Eversource Energy has a trailing yield of 2.4% on the current stock price of $93.46. If you buy this business for its dividend, you should have an idea of whether Eversource Energy's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Eversource Energy

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 76% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. Eversource Energy paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NYSE:ES Historical Dividend Yield, February 27th 2020

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Eversource Energy's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past ten years, Eversource Energy has increased its dividend at approximately 9.1% a year on average.

Final Takeaway

Should investors buy Eversource Energy for the upcoming dividend? Eversource Energy has been struggling to generate growth while also paying out more than half of its earnings to shareholders as dividends. Overall, Eversource Energy looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

Curious what other investors think of Eversource Energy? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.