Public Service Enterprise Group Incorporated (PEG Quick QuotePEG - Free Report) , better known as PSEG, recently announced that its boardofdirectors has approved a hikeof 12 cents per share in its common stock dividend for 2022. This marksthe 18th increase dividend payout in the past 18 years.The companyrevealed its plan to buy back sharesworth $500 million after the sale of its Fossil assets are completed.

 

Following the current hike, the company will now a pay a quarterly dividend of 54 cents per share, beginning fromthe first quarter of 2022, reflecting anincreaseof 5.9% hike fromthe prior payout.

 

This represents an attractive annual dividend yield of 3.58%, based on its share price worth as of Sep 28, which came in higher than its industry’s andthe Zacks S&P 500 composite’s yield of3.31% and 1.25%, respectively.

 

Utility industry being less affected by sudden economic fluctuations has certainty of cash inflows from various lines of operations. With consistent cash inflows,PSEG boasts financial flexibility that not only enables it to fund its growth investments but also reward shareholders in the form of dividends and share buyback.

 

PSEG’s financial strength can be gauged from its strong liquidity position. As of June 30, 2021, the company’scash flow from operating activities was $1,049 million, reflecting an improvement from prior quarter’s tally of $1,027 million. With gradual recovery of the economy from the challenges posed by the COVID-19 pandemic, the company may have witnessed improved electricity sales from commercial and industrial business sectors. This might have boosted its operating results in the past couple of months, thereby encouraging its management to take the decision of dividend hike and share repurchase.

 

PSEG aims at utilizing the sale proceeds worth $1.92 billion, following the divestiture its Fossil generating portfolio, in rewarding its shareholders through the aforementioned share buyback commitment of $500 million. The rest of the sale proceeds might be utilized in paying increased dividendsandfurther investment in its infrastructure.

 

Supported by consistency in cash flows, other utilities havealso been rewarding shareholders with solid dividend hikes.

 

For instance, in February 2021, Ameren Corporation (AEE Quick QuoteAEE - Free Report) announced that its board of directors has approved a quarterly cash dividend 55 cents per share, reflecting an increase of 6.8% from prior cash dividend of 51.5 cents per share.

 

In the same month, NextEra Energy (NEE Quick QuoteNEE - Free Report) announced a 10% hike in its quarterly dividend, reflecting the revised dividend worth 38 cents per share.

 

Similarly, in July,Duke Energy (DUK Quick QuoteDUK - Free Report) announced an increase of 2.1%in its quarterly dividend to 98.5 cents.

 

In the past one year, shares of PSEG have gained 10.1% compared with the industry’s growth of 6.6%.

PSEG carries a Zacks #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.