On Jul 11, we have issued an updated research report on DTE Energy Company (DTE). A favorable financial position, systematic investments in infrastructure projects and focus on renewable ventures will likely boost the company’s future performance. In addition, we appreciate DTE Energy’s steady effort towards maximizing shareholders’ value through payment of dividends at regular intervals and pursuing effective share repurchase program. However, strict government regulations and volatile commodity prices might pose challenge for its future growth.
DTE Energy, a Zacks Rank #3 (Hold) stock, maintained a stable liquidity position. As of Mar 31, 2014, the company had total liquidity of $1,553 million, including $1,455 million as net available fund and cash balance of $98 million. In addition, DTE Energy reported operating cash flow of $532 million during first-quarter 2014.
A steady financial profile enables DTE Energy to pursue infrastructure development initiatives. The company plans to invest $6.5 billion as capital expenditure between 2014 and 2016. The company is primarily focusing on improving its existing infrastructure for electricity and gas utilities, and gas storage & pipelines operations, besides adding new assets to its portfolio. These initiatives will enable DTE Energy to meet increasing customer demand while improving reliability.
In addition, DTE Energy continues to expand its renewable asset base. Recently, the company acquired the 75-megawatt Pheasant Run II wind park from a unit of NextEra Energy, Inc. (NEE). In Mar 2014, DTE Energy completed a construction project related to conversion of a closed coal-fired power plant to a biomass fuel-fired operation. The company plans to invest around $1.1 billion within a time span of 2008 to 2015. The scheduled completion of these ventures will enable DTE Energy to achieve the state of Michigan’s renewable goal of 10% by 2015.
DTE Energy follows a practice of paying regular dividend. In Jun 2014, the board of directors of the company approved a 5.3% increase in its quarterly dividend rate from the previous payout. On the other side, DTE Energy repurchased 690 million shares for $50 million during first-quarter 2014.
On the flip side, DTE Energy’s operations are subject to strict federal, state, and local regulations. Any changes and alterations in rules could lead to further investments or induce the company to discontinue some of its operations, which in turn may impact its future performance.
Key Picks from the Sector
However, some better-ranked stocks in the same sector include Consolidated Edison, Inc. (ED) and Wisconsin Energy Corp. (WEC). All the stocks carry a Zacks Rank #1 (Strong Buy).