OGE Energy Corporation (OGE - Free Report) announced that its board of directors has approved a 6% increase in the quarterly dividend rate. Notably, the revised dividend will be 38.75 cents, which is payable on Oct 30, 2019, to stockholders on record as of Oct 10. The new annualized dividend rate of the company is $1.55.
The current dividend yield of the company is 3.41%, which is better than the industry’s 2.80% and the S&P 500 Index’s 1.89%.
Can OGE Energy Maintain Dividend Hikes?
OGE Energy plans to spend around $3 billion between 2019 and 2023 to upgrade its infrastructure and provide seamless services to customers. The company expects long-term earnings growth rate in the range of 4-6% for its OG&E unit. It generated cash flow from operations of $951.1 million in 2018 compared with $784.5 million in 2017 and $644.7 million in 2016. The trend of generating higher cash flow indicates the company’s financial strength.
Moreover, the company’s investment in Enable Midstream, which has strong financial metrics, continues to boost the gathering and processing segment. The company received distributions of $70.6 million during the first six months of 2019 from its investment in Enable. These funds will drive dividend growth in the future.
We believe that the company’s systematic investments to enhance financial growth and its steady performance will lead to further increase in annual dividend rate.
Importance of Dividend Hike in Utility Space
The Utilities sector provides 24X7 basic electric, water and gas services to customers. Thus, this sector is immune to fluctuations in the economy. Stable earnings and cash flow enable utilities to reward shareholders with regular dividends and share buybacks.
Other than OGE Energy, there are other utilities that have raised their dividend rates on a year-to-date basis. In January, ONEOK’s (OKE - Free Report) board of directors announced a quarterly dividend hike to 86 cents per share, up 12% year over year. This led to an annualized dividend of $3.44. In July, Duke Energy (DUK - Free Report) announced that its board of directors has approved a quarterly cash dividend of 94.5 cents per share on its common stock. This marks a quarterly increase of 1.75 cents or 1.85%. In September, IDACORP (IDA - Free Report) announced that the board of directors has approved a 6.3% increase in the quarterly dividend rate to 67 cents. The new annualized dividend rate of the company is $2.68.
Zacks Rank & Price Movement
OGE Energy currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of the company have returned 25% in the past 12 months compared with 16.5% growth of the industry.
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