PPL (NYSE:PPL) Has Announced That It Will Be Increasing Its Dividend To $0.2575
The board of PPL Corporation (NYSE:PPL) has announced that it will be paying its dividend of $0.2575 on the 1st of April, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 3.8%, which is fairly typical for the industry.
See our latest analysis for PPL
PPL's Earnings Easily Cover The Distributions
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.
The next year is set to see EPS grow by 92.0%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 50% which would be quite comfortable going to take the dividend forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $1.47 in 2014 to the most recent total annual payment of $1.03. The dividend has shrunk at around 3.5% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Dividend Growth Potential Is Shaky
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. PPL's EPS has fallen by approximately 17% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
PPL's Dividend Doesn't Look Great
Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for PPL that investors should take into consideration. Is PPL not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
