June 03, 2025 a 12:47 pm
NI: Dividend Analysis - NiSource Inc.
NiSource Inc. demonstrates a long-term commitment to dividend payments, reflected in its 41 years of continuous dividend history. The utility sector, characterized by stable revenues, supports NiSource's steady dividend yield of 2.79%. With a modest growth in dividends, the company appears committed to maintaining and gradually increasing its payouts, crucial for income-focused investors. However, potential investors should be wary of negative free cash flow impacts and a relatively high payout ratio.
Overview 📊
NiSource operates within the utility sector, which typically offers stable and predictable cash flows beneficial for consistent dividend distributions. The current dividend yield stands at a competitive 2.79%, with recent dividend payments amounting to $1.08 per share. Impressively, NiSource has maintained dividend payments over 41 years, underlining its reliability. Notably, there has been no recent dividend cut or suspension, which speaks positively to its financial health.
| Metric | Value |
|---|---|
| Sector | Utility |
| Dividend Yield | 2.79% |
| Current Dividend Per Share | $1.08 |
| Dividend History | 41 years |
| Last Cut or Suspension | None |
Dividend History 🗣️
NiSource's dividend history is a testament to its unwavering financial policy. With 41 years of continuous payments, investors perceive a low risk of dividend reduction. Significant in assessing long-term dividend potential, the stability of payments showcases the underlying strength of NiSource's business model. Regular increments also instill confidence in how the company handles economic cycles.
| Year | Dividend Per Share (USD) |
|---|---|
| 2025 | 0.84 |
| 2024 | 1.06 |
| 2023 | 1.00 |
| 2022 | 0.94 |
| 2021 | 0.88 |
Dividend Growth 📈
Dividend growth is fundamental for portfolio enhancement, reflecting management's confidence in enduring profitability. Over the last three years, the dividend grew by 6.40%, whereas five-year growth was at a modest 5.79%. This gradual growth trajectory signifies consistent corporate health, crucial for investors relying on capital appreciation alongside dividends.
| Time | Growth |
|---|---|
| 3 years | 6.40% |
| 5 years | 5.79% |
The average dividend growth is 5.79% over 5 years, showcasing moderate yet steady dividend growth, vital for strategic income planning.
Payout Ratio ⚠️
The payout ratio serves as a vital indicator of dividend sustainability. NiSource's EPS-based payout ratio is 58.22%, which falls within a conservative range, suggesting sufficient earnings coverage. However, the free cash flow-based payout ratio is notably negative, at -81.57%, indicating potential liquidity constraints. Investors should closely monitor this metric to assess future dividend security.
| Key Figure | Ratio |
|---|---|
| EPS-based | 58.22% |
| Free Cash Flow-based | -81.57% |
The high EPS-based ratio indicates acceptable dividend coverage, but the negative FCF suggests potential concerns in dividend funding, warranting comprehensive future analysis.
Cashflow & Capital Efficiency ✅
The analysis of free cash flow, earnings yield, and capital expenditures reveals crucial insights into NiSource's operational efficiency and ability to fund dividends. Consistently negative free cash flow yield (-3.66%) emphasizes reliance on external financing for dividend coverage. However, a stable earnings yield of 4.67% suggests room for profitability improvement. Furthermore, a CAPEX to Operating Cash Flow ratio of 1.30 indicates aggressive reinvestment strategies. It is imperative for the company to optimize these metrics to strengthen its capital framework.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Free Cash Flow Yield | -5.16% | -6.43% | -7.11% |
| Earnings Yield | 4.55% | 6.47% | 7.20% |
| CAPEX to Operating Cash Flow | 1.48 | 1.37 | 1.56 |
| Stock-based Compensation to Revenue | 0.80% | 0.43% | 0.43% |
| Free Cash Flow / Operating Cash Flow Ratio | -48.36% | -36.73% | -56.31% |
The cashflow and capital efficiency data suggest a need for strategic adjustments to buffer cash flow availability, imperative for sustainable dividend distributions.
Balance Sheet & Leverage Analysis 📉
The leverage and liquidity ratios provide insights into NiSource's capital structure and financial resilience. NiSource exhibits a high Debt-to-Equity ratio of 1.61, implying significant leverage. The company's current ratio, at a low 0.51, flags potential short-term liquidity stress, while the Debt-to-Capital ratio of 0.62 reinforces asset utilization reliance on debt. Investors are urged to consider these risks when forecasting long-term equity value.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Debt-to-Equity | 1.61 | 1.71 | 1.54 |
| Debt-to-Assets | 0.44 | 0.45 | 0.44 |
| Debt-to-Capital | 0.62 | 0.63 | 0.61 |
| Net Debt to EBITDA | 5.33 | 5.37 | 5.43 |
| Current Ratio | 0.51 | 0.85 | 0.55 |
| Quick Ratio | 0.41 | 0.76 | 0.39 |
| Financial Leverage | 3.66 | 3.76 | 3.53 |
The balance sheet analysis raises concerns about financial flexibility, emphasizing the necessity for NiSource to address debt management strategies and liquidity optimization to safeguard shareholder interests.
Fundamental Strength & Profitability 📊
Analyzing NiSource's profitability metrics, including ROE, ROA, and profit margins, highlights operational efficiency. Exhibiting a modest ROE of 10.30% and an ROA of 2.63%, the company reveals average resource utilization. The net profit margin stands at an industry-aligned 13.94%, alongside stable EBIT and EBITDA margins. Nevertheless, absent R&D expenses suggest prioritization of stable operations over innovation. These metrics necessitate proactive management to uphold competitive advantage.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Return on Equity | 8.76% | 8.64% | 10.61% |
| Return on Assets | 2.39% | 2.30% | 3.01% |
| Net Profit Margin | 13.94% | 12.97% | 13.74% |
| EBIT Margin | 27.97% | 23.89% | 22.71% |
| EBITDA Margin | 46.99% | 40.17% | 36.56% |
| Gross Profit Margin | 51.47% | 45.20% | 38.47% |
| Research & Development to Revenue | 0% | 0% | 0% |
By maintaining profitability metrics above industry norms, NiSource safeguards its market stance. However, future imperatives include leveraging R&D expenditures for potential growth avenues.
Price Development 📉
Dividend Scoring System ✅
The following table assesses NiSource's dividend attractiveness based on key criteria.
| Category | Score (1-5) | Bar |
|---|---|---|
| Dividend Yield | 3 | |
| Dividend Stability | 5 | |
| Dividend Growth | 3 | |
| Payout Ratio | 2 | |
| Financial Stability | 3 | |
| Dividend Continuity | 5 | |
| Cashflow Coverage | 2 | |
| Balance Sheet Quality | 3 |
Total Score: 26/40
Rating ⚠️
NiSource Inc. offers a stable, though moderate dividend yield, supported by a long history of uninterrupted payments. While their financial strength suggests resilience, potential headwinds include negative free cash flow and high leverage levels. Investors seeking dependable income may find NiSource appealing, but should remain cautious due to liquidity risks and ensure careful alignment with broader investment strategies.