FirstEnergy (FE) Rewards Shareholders With 5% Dividend Hike
FirstEnergy Corporation FE announced that its board of directors has approved a 5% increase in its quarterly dividend rate. The new dividend rate will be 41 cents per share compared with the previous quarter’s 39 cents, payable on Dec 1, 2023, to stockholders of record as of Nov 7, 2023.
This increase resulted in an annualized dividend of $1.64 per share compared with the previous level of $1.56. The current dividend yield is 4.42%, higher than the industry’s average of 3.8%. The company’s board of directors approved a new dividend policy that increases targeted payout ratio to 60-70% from the previous 55-65%.
Can FirstEnergy Sustain Dividend Hikes?
FirstEnergy’s efforts to expand its regulated generation mix provided stability to its earnings trajectory. In the last few years, the company witnessed a successful broadening of regulated operations and a complete transition to become a fully-regulated utility company. It is gaining from improving economic conditions and rising demand from commercial and industrial groups compared with the previous year.
FirstEnergy’s strategic investment will help serve customers more efficiently. In the past several years, Regulated Distribution has experienced rate base growth through investments. The company’s ‘Energizing the Future’ plan is aimed at enhancing and expanding regulated transmission capabilities.
FE plans to invest nearly $18 billion in the 2021-2025 period to further strengthen its existing operations. Such planned investments will result in annual rate-base growth of 7% over the 2024-2025 period. FirstEnergy expects its earnings per share to improve annually in the range of 6-8% in the long term.
FirstEnergy’s growth prospects and ability to further enhance its performance indicate that management will have enough funds to sustain its shareholder-friendly initiatives in the future.
Utilities’ Legacy of Dividend Payment
Companies involved in utility services generally have stable operations and earnings. Consistent performance, regulated returns and the ability to generate cash flows allow utilities to reward shareholders with regular dividends.
Recently, IDACORP Inc. IDA, Fortis Inc. FTS and Consolidated Water Co. Ltd. CWCO have raised their quarterly dividend rate by 5.1%, 4.4% and 11.8%, respectively.
The Zacks Consensus Estimate for IDACORP’s 2023 earnings is pegged at $5.04 per share, implying a year-over-year decrease of 1.4%. Its current dividend yield is 3.31%.
The Zacks Consensus Estimate for Fortis’s 2023 earnings is pinned at $2.2 per share, implying a year-over-year increase of 2.8%. Its current dividend yield is 4.27%.
The Zacks Consensus Estimate for Consolidated Water’s 2023 earnings is pegged at $1.46 per share, implying a year-over-year improvement of 170.4%. Its current dividend yield is 1.16%.
Price Performance
In the past year, FirstEnergy’s shares have lost 8.7% compared with the industry’s average decline of 9.7%.
Image Source: Zacks Investment Research
Zacks Rank
FirstEnergy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
FirstEnergy Corporation (FE) : Free Stock Analysis Report
IDACORP, Inc. (IDA) : Free Stock Analysis Report
Consolidated Water Co. Ltd. (CWCO) : Free Stock Analysis Report
Fortis (FTS) : Free Stock Analysis Report
