Avangrid (NYSE:AGR) Will Pay A Dividend Of $0.44

Avangrid, Inc.'s (NYSE:AGR) investors are due to receive a payment of $0.44 per share on 3rd of April. Based on this payment, the dividend yield on the company's stock will be 4.3%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Avangrid

Avangrid's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Avangrid was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. We think that this practice can make the dividend quite risky in the future.

Over the next year, EPS is forecast to expand by 8.2%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 74% which would be quite comfortable going to take the dividend forward.

Avangrid Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the annual payment back then was $1.73, compared to the most recent full-year payment of $1.76. Its dividends have grown at less than 1% per annum over this time frame. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

Avangrid May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately, Avangrid's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Avangrid's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

Avangrid's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Avangrid's payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 identified 2 warning signs for Avangrid (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.

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