PNM Resources (PNM) Raises Annual Dividend Rate by 5.4%
PNM Resources, Inc.’s PNM board of directors approved an increase in the quarterly dividend rate by 2 cents. The revised quarterly dividend will be 38.75 cents, payable on Feb 16, 2024, to shareholders of record at the close of business on Feb 2, 2014.
The annualized dividend of the company will come to $1.55, up 5.4% from the prior rate. The current annualized dividend yield is 3.68%, slightly higher than the industry average of 3.52%.
PNM Resources’ dividend payout ratio after the increment was 55.9%. The company targets a dividend payout ratio in the band of 50-60% over the long term.
The company generally reviews its dividend rate once a year and its board takes into consideration, among other things, factors like the sustainability of the dividend, funds required for capital investments and industry standards before approving a hike.
Can PNM Resources Sustain the Dividend?
PNM Resources is working on developing its infrastructure and providing better services to its customers. The company plans to invest $5.9 billion over the 2023-2027 time frame. The company is expanding its operations through organic and inorganic means. The capital investment plan will support an average rate base CAGR of 10.6% during the 2023-2027 period.
PNM Resources has been a consistent performer, with its earnings beating the Zacks Consensus Estimate in three out of the last four quarters. The long-term objective of the company is to ensure earnings growth of 5% over a period of five years (2020 being the base year) and to maintain a competitive dividend payout.
Cash flow from operating activities at the end of the first nine months of 2023 was $412.6 million and during the same period, the company utilized $95 million for dividend payouts. The company's strong cash flow-generating capability will aid it in funding incremental dividends.
Utilities Continue to Reward Shareholders
Domestic-focused, rate-regulated utilities are stable performers, which allows them to reward shareholders through dividend hikes and share buybacks. Other utilities like UGI Corporation UGI, Atmos Energy Corporation ATO and Southern Company SO have raised dividend rates during 2023. The above-mentioned utilities have raised annual dividend rates for more than the past two decades.
The current dividend yields of UGI, Atmos Energy and Southern Company are 6.58%, 2.8% and 3.93%, respectively, which is better than Zacks S&P 500 Composite’s yield of 1.68%.
Price Performance
Shares of PNM Resources have underperformed the industry in the last six months.
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Zacks Rank
PNM Resources currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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