There is a lot to be liked about WEC Energy Group Inc (NYSE:WEC) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 3.3% to shareholders, making it a relatively attractive dividend stock. Does WEC Energy Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does WEC Energy Group fit our criteria?
WEC Energy Group has a trailing twelve-month payout ratio of 53%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 67%, leading to a dividend yield of 3.5%. However, EPS is forecasted to fall to $3.41 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of WEC it has increased its DPS from $0.54 to $2.21 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes WEC a true dividend rockstar.
Compared to its peers, WEC Energy Group produces a yield of 3.3%, which is on the low-side for Integrated Utilities stocks.
Taking into account the dividend metrics, WEC Energy Group ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three essential factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for WEC’s future growth? Take a look at our free research report of analyst consensus for WEC’s outlook.
- Historical Performance: What has WEC’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.