Pinnacle West Capital Corp's Dividend Analysis
An In-depth Look into Pinnacle West Capital Corp's Dividend Performance and Sustainability
Pinnacle West Capital Corp(NYSE:PNW) recently announced a dividend of $0.88 per share, payable on 2023-12-01, with the ex-dividend date set for 2023-10-31. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Pinnacle West Capital Corps dividend performance and assess its sustainability.
What Does Pinnacle West Capital Corp Do?
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Pinnacle West is a holding company whose principal subsidiary is Arizona Public Service, a vertically integrated electric utility that serves 1.3 million customers across a 35,000-square-mile territory in central Arizona, including Phoenix. APS owns or leases more than 6 gigawatts of power generation capacity, including a 29% ownership stake in the largest nuclear plant in the U.S., Palo Verde. About half of the electricity that APS supplies to customers comes from clean energy sources, including nuclear.
A Glimpse at Pinnacle West Capital Corp's Dividend History
Pinnacle West Capital Corp has maintained a consistent dividend payment record since 1993. Dividends are currently distributed on a quarterly basis. Pinnacle West Capital Corp has increased its dividend each year since 1993. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 30 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Pinnacle West Capital Corp's Dividend Yield and Growth
As of today, Pinnacle West Capital Corp currently has a 12-month trailing dividend yield of 4.69% and a 12-month forward dividend yield of 4.78%. This suggests an expectation of increase dividend payments over the next 12 months.
Over the past three years, Pinnacle West Capital Corp's annual dividend growth rate was 4.50%. Extended to a five-year horizon, this rate increased to 5.30% per year. And over the past decade, Pinnacle West Capital Corp's annual dividends per share growth rate stands at 5.20%.
Based on Pinnacle West Capital Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Pinnacle West Capital Corp stock as of today is approximately 6.07%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Pinnacle West Capital Corp's dividend payout ratio is 0.97. And this may suggest that the company's dividend may not be sustainable.
Pinnacle West Capital Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Pinnacle West Capital Corp's profitability 7 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Pinnacle West Capital Corp's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Pinnacle West Capital Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Pinnacle West Capital Corp's revenue has increased by approximately 7.40% per year on average, a rate that underperforms than approximately 51.44% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Pinnacle West Capital Corp's earnings increased by approximately -3.70% per year on average, a rate that underperforms than approximately 69.43% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 1.40%, which underperforms than approximately 61.88% of global competitors.
Next Steps
While Pinnacle West Capital Corp has a commendable dividend history, its high payout ratio and underperformance in growth metrics relative to global competitors raise questions about the sustainability of its dividends. However, with a strong profitability rank and a good growth rank, the company holds promise. Investors must closely monitor these factors while making decisions about investing in Pinnacle West Capital Corp.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
