Yahoo Finance Centrica plc (LON:CNA) Will Pay UK£0.036 In Dividends
On the 22 November 2018, Centrica plc (LON:CNA) will be paying shareholders an upcoming dividend amount of UK£0.036 per share. However, investors must have bought the company’s stock before 11 October 2018 in order to qualify for the payment. That means you have only 4 days left! What does this mean for current shareholders and potential investors? Below, I will explain how holding Centrica can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
Check out our latest analysis for Centrica
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is its annual yield among the top 25% of dividend-paying companies?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share risen in the past couple of years?
Is is able to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
How does Centrica fare?
The current trailing twelve-month payout ratio for CNA is 127%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 86%, leading to a dividend yield of around 7.8%. Moreover, EPS should increase to £0.11, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Not only have dividend payouts from Centrica fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
In terms of its peers, Centrica produces a yield of 8.0%, which is high for Integrated Utilities stocks.
Next Steps:
If you are building an income portfolio, then Centrica is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three important factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for CNA’s future growth? Take a look at our free research report of analyst consensus for CNA’s outlook.
Valuation: What is CNA worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CNA is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
