Exploring the Sustainability of Centrica PLC's Dividend Payments
Centrica PLC (CPYYY, Financial) recently announced a dividend of $0.07 per share, payable on November 27, 2023, with the ex-dividend date set for October 5, 2023. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Centrica PLC's dividend performance and assess its sustainability.
What Does Centrica PLC Do?
Centrica is a diversified utility based in the U.K. with operations that produce oil and gas and supply natural gas and electricity. Its British Gas business unit is the largest residential supplier of natural gas and HVAC services in Britain.
A Glimpse at Centrica PLC's Dividend History
Centrica PLC has maintained a consistent dividend payment record since 2022. Dividends are currently distributed on a bi-annually basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Centrica PLC's Dividend Yield and Growth
As of today, Centrica PLC currently has a 12-month trailing dividend yield of 2.11% and a 12-month forward dividend yield of 2.40%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, Centrica PLC's annual dividend growth rate was -53.40%. Based on Centrica PLC's dividend yield and five-year growth rate, the 5-year yield on cost of Centrica PLC stock as of today is approximately 2.11%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of June 30, 2023, Centrica PLC's dividend payout ratio is 0.04. Centrica PLC's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Centrica PLC's profitability 5 out of 10 as of June 30, 2023, suggesting fair profitability. The company has reported net profit in 6 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Centrica PLC's growth rank of 5 out of 10 suggests that the company has a fair growth outlook. Revenue is the lifeblood of any company, and Centrica PLC's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Centrica PLC's revenue has increased by approximately 21.50% per year on average, a rate that outperforms than approximately 69.34% of global competitors. The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Centrica PLC's earnings increased by approximately 7.50% per year on average, a rate that outperforms than approximately 49.16% of global competitors.
Conclusion: A Promising Dividend Performer?
Considering Centrica PLC's consistent dividend payments, its growth in revenue and earnings, and a reasonable payout ratio, the company appears to be a promising candidate for investors seeking dividend-paying stocks. However, the negative dividend growth rate over the past three years raises questions about the sustainability of future dividend payments. As always, investors should conduct their due diligence before making investment decisions. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
