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PNM Resources (PNM) to Reward Shareholders Via 6.5% Dividend Hike

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The board of directors of PNM Resources (PNM - Free Report) recently raised its annual dividend by 8 cents per share, marking a 6.5% hike. This brings the quarterly dividend total to 32.75 cents per share and the annual dividend to $1.31.

The new dividend will be payable Feb 16, 2021 to the utility’s shareholders of record on Feb 3, 2021. This hike is consistent with the company’s targeted long-term dividend payout ratio of 50-60% of earnings. Moreover, the expected 2020-2023 dividend growth rate is on par with the utility's earnings per share growth of 5-6%.

Can This Dividend be Sustained?

The utility has been steadily increasing its dividends since 2012. Prior to this, in December 2019, PNM Resources upped its annual dividend by 6%, expanding it to $1.23 per share from $1.16 and eventually enhancing its shareholders’ value. The stable hikes in dividend reflect the company’s strong operating performance.

Also, the utility is making efforts to grow organically, which is boosting its performance as well as cash flow. PNM Resources continues to invest substantially in its utility assets to provide reliable services to its customers. It plans to invest $4.1 billion through the 2020-2024 forecast period, focusing on strengthening its transmission and distribution network. These investments lead to 8.9% rate base growth. We believe that the ongoing capital expenses will solidify infrastructure while rate hikes will reinforce the financial position of the company. This will lead to continuous dividend hikes.

Other Utilities Hiking Dividend

Apart from PNM Resources, other utility companies like MDU Resources (MDU - Free Report) , Chesapeake Utilities Corporation (CPK - Free Report) and Essential Utilities Inc (WTRG - Free Report) are rewarding their shareholders with dividend hikes despite the ongoing pandemic.

MDU Resources’ new annualized dividend is 85 cents per share while Chesapeake Utilities hiked its dividend by 8.6% to 44 cents. Also, Essential Utilities raised its quarterly dividend by 7% to 25.07 cents per share.

Zacks Rank & Price Performance

The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past six months, shares of the company have gained 14.1% against the industry’s 4% decline.

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