Even Utilities Are Cutting Their Dividends

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Texas-based utility CenterPoint Energy is slashing its dividend to adjust to a drop in cash flow, the latest company to cut or suspend its payout to weather the coronavirus crisis.

Even Utilities Are Cutting Their Dividends

Texas-based utility CenterPoint Energy is slashing its dividend to adjust to a drop in cash flow, the latest company to cut or suspend its payout to weather the coronavirus crisis.

https://www.barrons.com/articles/s-p-500-dividends-will-fall-25-this-year-analysts-say-51585578961 https://www.barrons.com/articles/mlp-dividends-are-starting-to-get-cut-51584988795 https://www.barrons.com/articles/utilities-slid-like-many-stocks-last-week-they-still-offer-a-defensive-dividend-haven-analysts-agree-51584959401 mailto:lawrence.strauss@barrons.com Even Utilities Are Cutting Their Dividends By Lawrence C. Strauss Photograph by Sean Gallup/Getty Images

Texas-based utility CenterPoint Energy is slashing its dividend to adjust to a drop in cash flow, the latest company to cut or suspend its payout to weather the coronavirus crisis.

CenterPoint (ticker: CNP) in a press release Wednesday cited a “targeted reduction” in the quarterly dividend of its common stock to 15 cents a share from 29 cents. It also plans to slash 2020 capital spending by about $300 million to $2.3 billion, among other cost-savings moves.

In a research note Monday, Goldman Sachs included CenterPoint in its list of high-yielding stocks that it considered to have safe dividends. The stock was at around $14 in midday trading Thursday, up nearly 1% on the session. CenterPoint’s shares are down about 45% year to date.

Separately, Enable Midstream Partners (ENBL) announced a 50% distribution reduction for its common units. This is important because CenterPoint has a 53.7% stake in Enable.

Enable, a master limited partnership, operates oil and gas pipelines along with midstream processing plants, among other assets.

Charles Fishman, a Morningstar utility analyst, says that CenterPoint’s “exposure is somewhat unique” due to its stake in Enable, adding that it receives about $300 million of cash annually from Enable: “Even for a big utility, that’s real money.”

That cash distribution is used by CenterPoint to help pay its own dividend, he adds.

More than half of CenterPoint’s business is regulated, meaning that it typically requires approval by state regulatory authorities for rate increases. This type of business is generally seen as relatively stable, although electricity use will no doubt come under pressure, particularly from commercial and industrial customers as a steep recession looms.

Write to Lawrence C. Strauss at lawrence.strauss@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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