OGE Energy Corp.’s (OGE Quick QuoteOGE - Free Report) ongoing systematic capital investment, initiatives to reduce carbon dioxide (CO2) emissions and solid liquidity are likely to drive its performance in the long run.

Let’s focus on the factors that make this Zacks Rank #2 (Buy) stock a strong investment pick at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Growth Projection & Surprise History

The Zacks Consensus Estimate for OGE Energy’s 2022 earnings has moved up by 1.9% in the past 30 days to $2.17 per share.

OGE delivered an average earnings surprise of 24.07% in the last four quarters.

OGE Energy’s long-term (three to five years) earnings growth is projected at 3.5%.

Dividend

OGE Energy has a long history of dividend payments and has been paying dividends to shareholders consecutively since 1971. OGE targets a dividend payout ratio in the band of 65-70% in the next five years. The new quarterly dividend for 2022 is 41 cents per share, which represents a 2.5% increase from 2021.

Currently, OGE Energy has a dividend yield of 4.2% compared with the industry’s yield of 3.1%.

Stable Investments & Emissions Reduction

OGE Energy is the largest electric utility in Oklahoma and is pursuing an aggressive investment strategy to upgrade its infrastructure and provide seamless services to its customers. OGE plans to spend around $4.75 billion between 2022 and 2026, which implies an improvement of 14.7% from the prior five-year capital expenditure plan. For 2022, the company has allocated $950 million, which includes $720 million for strengthening its transmission, distribution and grid expansion operations.

Oklahoma Gas and Electric Company’s (OG&E) current business strategy reduced CO2 emissions by more than 40%, and ozone-forming nitrogen oxide and sulfur dioxide emissions by nearly 70% and 85%, respectively, compared with 2005 levels. OG&E expects to further reduce CO2 emissions to 50% of 2005 levels by 2030. To achieve this target, OG&E converted two coal-fired generating units and plans to retire 850 megawatt of legacy units and replace the production with solar and hydrogen-capable combustion turbines.

Debt Position

The Debt-to-Capital ratio of OGE Energy at the end of the fourth quarter of 2021was 0.55 compared with the industry average of 0.59. This indicates that OGE is using comparatively lower debts to manage the business compared with its peers.

The times interest earned ratio of OGE Energy at the end of the fourth quarter of 2021 was 6.4, which improved sequentially from 4.4, thereby indicating that the company has enough financial strength to meet its near-term obligations.

Return on Equity

Return on Equity (ROE) indicates how efficiently a company is utilizing shareholders’ funds in the business to generate returns. At present, OGE Energy’s ROE is 12.5%, higher than the industry average of 9.9%, which indicates that OGE is utilizing the funds more effectively than industry peers.

Price Performance

In the past six months, OGE Energy has rallied 14.7% compared with the industry’s 3.9% growth.

Image Source: Zacks Investment Research

Other Stocks to Consider

Some other similar-ranked stocks from the same industry include PNM Resources Inc. (PNM Quick QuotePNM - Free Report) , XEL Energy Inc. (XEL Quick QuoteXEL - Free Report) and WEC Energy Group Inc. (WEC Quick QuoteWEC - Free Report) .

The long-term earnings growth of PNM Resources, XEL Energy and WEC Energy is projected at 5%, 6.4% and 6%, respectively.

The Zacks Consensus Estimate for 2022 earnings per share of PNM Resources, XEL Energy and WEC Energy reflects 4.1%, 7.4% and 4.6% growth, respectively, over 2021’s reported figure.

In the past month, PNM, XEL and WEC shares have surged 2.3%, 6.3% and 5.8%, respectively.