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CMS Energy Corporation (CMS - Analyst Report) has announced that it will pay an incremental dividend in the first quarter of 2014. The board of directors has increased the quarterly cash dividend rate by 5.9% year over year to 27 cents per share. The increased dividend will be paid on Feb 28, 2014 to stockholders of record as of Feb 7.

On an annualized basis, the new dividend rate will be $1.08 per share. The new annual dividend yield will be 4%, which will be higher than the industry average of 2.3%.

CMS Energy’s policy of paying incremental dividends supports its commitment to improve long-term value for shareholders. This is the eighth consecutive year of dividend increase. The last dividend hike was made in Jan 2013 when it was increased 6.3% to 25.5 cents per share from the earlier payout of 24 cents per share.

In the long term, CMS Energy expects annual earnings growth to be in the range of 5.0% to 7.0%. The company plans to continue to increase its dividend with earnings growth.

The company’s cash flow from operating activities during the first nine months of 2013 was $1.1 billion while the cash balance was $0.3 billion as of Sep 30, 2013. A strong financial position helps CMS Energy to meet its anticipated cash requirements for dividend payment and future projects.

Further, CMS Energy plans to invest approximately $7.0 billion in the next five years to upgrade its distribution system and generation assets including advanced metering infrastructure and renewable investments. These initiatives would boost the company’s profitability in the long run, which in turn will enable it to provide higher returns to its shareholders.

CMS Energy currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the same sector include Wisconsin Energy Corp. (WEC - Analyst Report), The AES Corporation (AES - Analyst Report) and ALLETE, Inc. (ALE - Snapshot Report), each with a Zacks Rank #2 (Buy).

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