Yahoo Finance FirstEnergy (NYSE:FE) Will Pay A Dividend Of $0.39
FirstEnergy Corp. (NYSE:FE) has announced that it will pay a dividend of $0.39 per share on the 1st of March. Based on this payment, the dividend yield on the company's stock will be 3.8%, which is an attractive boost to shareholder returns.
View our latest analysis for FirstEnergy
FirstEnergy's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. At the time of the last dividend payment, FirstEnergy was paying out a very large proportion of what it was earning and 1,129% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.
The next year is set to see EPS grow by 29.9%. If the dividend continues on this path, the payout ratio could be 56% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $2.20 in 2012 to the most recent total annual payment of $1.56. The dividend has shrunk at around 3.4% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. FirstEnergy has impressed us by growing EPS at 56% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which FirstEnergy hasn't been doing.
Our Thoughts On FirstEnergy's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about FirstEnergy's payments, as there could be some issues with sustaining them into the future. While FirstEnergy is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
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, FirstEnergy has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Is FirstEnergy not quite the opportunity you were looking for? Why not check out our selection of top 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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