Introduction
After almost fifteen years of providing a stable and growing dividend, CenterPoint Energy (CNP) recently disappointed shareholders by reducing their upcoming dividend by almost half. Even though this now sits in the rear-view mirror, analyzing the situation can still provide insights into not only the sustainability of their new dividend but also whether there were warning signs that this was imminent.
Dividend Coverage
When assessing dividend coverage, I prefer to forgo using earnings per share and use free cash flow instead, since dividends are paid from cash and not from “earnings”.