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Analyzing CenterPoint Energy’s Forward Dividend Yield

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CenterPoint Energy’s forward dividend yield

Currently, CenterPoint Energy (CNP) is trading at a forward dividend yield of 4.6%. A company’s forward dividend yield is calculated by dividing its estimated one-year future dividend per share by its market price per share. The graph below shows CNP’s forward yield compared to its three-year historical average of 4.7%

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Utilities trade lower than their average yields

CenterPoint Energy is trading marginally below its historical forward yield. Peers Xcel Energy (XEL) and DTE Energy (DTE) are both trading at a forward yield of 3.3%. Almost all utilities over the last six months were trading below their historical average yields. The epic surge of their share prices in the same period could be one of the reasons they’re trading below their average yields.

Generally, utilities (VPU) with more regulated operations tend to have lower yields than unregulated utilities. Regulated operations tend to generate stable earnings. Higher risk is expected to be compensated with higher yields.

Exelon (EXC) and FirstEnergy (FE) have forward yields near ~4.5%. Both of them have large exposures to unregulated operations and less stable earnings.

ETF exposure

The PowerShares High Yield Equity Dividend Achievers ETF (PEY) seeks to track a yield-weighted index of US companies that have raised their annual dividends for at least ten consecutive years. CenterPoint Energy has a 2.2% weighting in PEY.

PEY can be an attractive option for fixed-income hungry investors since the fund is committed to companies with stable or growing dividends. PEY invests 24% in utilities and 17% in financials.

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