Yahoo Finance Chesapeake Utilities (NYSE:CPK) Is Increasing Its Dividend To $0.59
Chesapeake Utilities Corporation's (NYSE:CPK) periodic dividend will be increasing on the 5th of July to $0.59, with investors receiving 10% more than last year's $0.535. Although the dividend is now higher, the yield is only 1.7%, which is below the industry average.
See our latest analysis for Chesapeake Utilities
Chesapeake Utilities' Payment Has Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Chesapeake Utilities' dividend was only 43% of earnings, however it was paying out 124% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Looking forward, earnings per share is forecast to rise by 25.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.
Chesapeake Utilities Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.973 total annually to $2.14. This means that it has been growing its distributions at 8.2% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
Chesapeake Utilities May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Chesapeake Utilities has only grown its earnings per share at 4.5% per annum over the past five years. Chesapeake Utilities is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
Our Thoughts On Chesapeake Utilities' Dividend
Overall, we always like to see the dividend being raised, but we don't think Chesapeake Utilities will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs for Chesapeake Utilities that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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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