WEC Energy Group (NYSE:WEC) Is Paying Out A Larger Dividend Than Last Year
WEC Energy Group, Inc.'s (NYSE:WEC) dividend will be increasing from last year's payment of the same period to $0.78 on 1st of September. This takes the annual payment to 3.5% of the current stock price, which is about average for the industry.
See our latest analysis for WEC Energy Group
WEC Energy Group'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. Before making this announcement, WEC Energy Group was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.
Over the next year, EPS is forecast to expand by 26.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 61%, which is in the range that makes us comfortable with the sustainability of the dividend.
WEC Energy Group Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.20 in 2013, and the most recent fiscal year payment was $3.12. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that WEC Energy Group's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think WEC Energy Group's payments are rock solid. While WEC Energy Group is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for WEC Energy Group you should be aware of, and 1 of them makes us a bit uncomfortable. Is WEC Energy Group 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.
