Capital Clean Energy Carriers Corp.'s (NASDAQ:CCEC) investors are due to receive a payment of $0.15 per share on 8th of August. This payment means the dividend yield will be 2.6%, which is below the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Capital Clean Energy Carriers' stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Capital Clean Energy Carriers' Projected Earnings Seem Likely To Cover Future Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, the dividend made up 129% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.
According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 18%, which is in a comfortable range for us.
Check out our latest analysis for Capital Clean Energy Carriers
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 $6.51 in 2015 to the most recent total annual payment of $0.60. Dividend payments have fallen sharply, down 91% over that time. 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 Has Limited Growth Potential
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Earnings per share has been sinking by 15% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
Capital Clean Energy Carriers' Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Capital Clean Energy Carriers make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 3 warning signs for Capital Clean Energy Carriers 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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