Yahoo Finance Chesapeake Utilities' (NYSE:CPK) Dividend Will Be Increased To $0.64
Chesapeake Utilities Corporation's (NYSE:CPK) dividend will be increasing from last year's payment of the same period to $0.64 on 5th of July. Although the dividend is now higher, the yield is only 2.3%, which is below the industry average.
Check out our latest analysis for Chesapeake Utilities
Chesapeake Utilities' Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Chesapeake Utilities was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
The next year is set to see EPS grow by 37.6%. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.
Chesapeake Utilities 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. The dividend has gone from an annual total of $1.03 in 2014 to the most recent total annual payment of $2.56. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Chesapeake Utilities May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 3.9% per year. The company has been growing at a pretty soft 3.9% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
We should note that Chesapeake Utilities has issued stock equal to 25% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
In Summary
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 don't think Chesapeake Utilities is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Chesapeake Utilities has 3 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
