Yahoo Finance Chesapeake Utilities (NYSE:CPK) Will Pay A Larger Dividend Than Last Year At US$0.54
Chesapeake Utilities Corporation (NYSE:CPK) has announced that it will be increasing its dividend on the 5th of July to US$0.54, which will be 11% higher than last year. Even though the dividend went up, the yield is still quite low at only 1.5%.
See our latest analysis for Chesapeake Utilities
Chesapeake Utilities' Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Chesapeake Utilities' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share is forecast to rise by 7.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.
Chesapeake Utilities Has A Solid Track Record
The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$0.92 in 2012, and the most recent fiscal year payment was US$1.92. This implies that the company grew its distributions at a yearly rate of about 7.6% 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. Chesapeake Utilities has seen EPS rising for the last five years, at 12% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Our Thoughts On Chesapeake Utilities' Dividend
In summary, while it's always good to see the dividend being raised, we don't think Chesapeake Utilities' payments are rock solid. While Chesapeake Utilities is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Chesapeake Utilities that investors should know about before committing capital to this stock. Is Chesapeake Utilities not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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