During the intraday trading on Apr 15, 2014, share prices of CMS Energy Inc. (CMS) reached a 52-week high of $30.00 per share, primarily backed by its dividend announcement, finally closing a notch lower at $29.98. With a market cap of roughly $8.0 billion, CMS Energy shares have increased 15.3% so far this year. The average volume traded over the last three months is around 2.3 million.
CMS Energy has rewarded shareholders by returning a substantial portion of the free cash flow through incremental dividends over the past three years. Currently, the company pays a quarterly dividend on its common stock of 27 cents per common share. This represents a $1.08 annualized dividend and a dividend yield of 3.60%, making the stock attractive for investors.
As a core utility portfolio holding, CMS is a pure-play regulated utility with reliable execution and lower risk. The Michigan Public Service Commission (:MPSC) has agreed to base its rate case request on a forward test year instead of a historical test year, as in other parts of the country. The company also has a regulatory provision to self-implement its requested rate hike for 6 months after filing. The regulatory body also has to decide on the rate case within one year of the filing, or before the proposed rates become permanent.
Again, the company registered a 48% year-over-year improvement in its bottom line during the fourth quarter of 2013 reflecting its focus on efficiency. With its robust pipeline of regulated investment opportunities and favorable regulatory treatment, the company remains on track to achieve its long-term bottom-line growth target of 5% to 7% and annual rate base growth of 6% to 7%. The strong rate base growth is also expected to extend into the next decade as the company projects 2018–2022 capital expenditure of $8.0 billion.
CMS Energy also tightened the 2014 earnings guidance range to $1.74–$1.78 per share from its earlier projection of $1.73–$1.78. This will be backed by the company’s impressive infrastructure. The company already plans to spend approximately $7.0 billion in the 2013–2017 time frame to upgrade its distribution system and generation assets through projects such as advanced metering infrastructure (:AMI) and renewable (wind) investments.
This Jackson, MI-based company is also working to reduce its costs as part of its Promise to Michigan program. This program aims at providing affordable and reliable services to its customers. The company has lowered its fuel costs by 44% over the past five years.
CMS Energy currently holds a Zacks Rank #2 (Buy). Some other stocks worth considering in the sector include Public Service Enterprise Group Inc. (PEG), NRG Energy, Inc. (NRG) and NRG Yield, Inc. (NYLD). All these stocks sport a Zacks Rank #1 (Strong Buy).