Dividend payments from energy supplier Centrica (CNA) must be considered at serious risk in the wake of the group’s shocking profit warning last week (23 November).

In a third quarter trading update the British Gas-owner slashed earnings guidance to 12.5p per share (EPS) for 2017 after losing 823,000 UK consumer customers and facing ‘significant market pressure’ in North America. The EPS consensus forecast had been 15p.

The latest setback continues a multi-year EPS declining trend. For example, in 2012 the group reported 26.4p.

Centrica is caught between the rock of stiff competition and a hard place of Government intervention, savage regulation and price caps.

Its shares are down 40% this year to 139.3p. Based on current dividend forecasts, the stock offers a prospective 8.6% yield. We view that high yield as a warning sign by the market that it doesn’t believe the dividend forecasts are realistic.

Centrica will presumably do everything possible to avoid having to cut the payout, as it did to devastating effect three years ago. Yet future dividends are already under pressure based on current consensus, which anticipates reduced income every year through to 2020.

That could mean further downward pressure on the share price ahead. Even more so if Centrica is eventually forced to rebase shareholder payouts, with the potential for capital losses to far exceed implied yield returns.

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