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WEC Energy to Reward Shareholders With 7.2% Dividend Hike

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WEC Energy Group’s WEC board of directors announced that it is planning to hike the quarterly dividend to 63.25 cents per share from the present level of 59 cents. The new quarterly dividend will be paid out on Mar 1, 2020 to its shareholders of record as of Feb 14, 2020. The company’s current annual dividend yield is 2.8% compared with the Zacks S&P 500 composite’s average yield of 1.8%.

The decision of the board is in sync with its target of a dividend payout ratio of 65-70% of earnings. The projected dividend growth is also in line with the company's longer-term objective to grow earnings per share at a 5-7% average annual rate.

Consistent Hike in Dividend Rates

WEC Energy has been raising dividend annually since 2010. The annual dividend payment is set to reach $2.53 per share in 2020 from 80 cents in 2010. This consistent increase in dividend is the outcome of the company’s strong performance. Owing to efficient management and proper execution of plans, WEC Energy has delivered strong results and surpassed earnings estimates over the past 14 years.  

As utilities provide basic services to customers, demand for the same does not fluctuate much, allowing the utilities to deliver stable performances year after year. Steady cash flow and earnings allow the utilities to reward their shareholders regularly through dividends and share buybacks. In the recent past, the board of directors of utilities like MDU Resources Group (MDU - Free Report) and IDACORP IDA, among others, have approved hike in their respective quarterly dividend rates.

Can WEC Energy Sustain Annual Hike?

WEC Energy updated five-year capital spending plans. In the 2019-2023 time frame, the company was planning to invest $14.11 billion but now it projects total capital expenditure to be nearly $15 billion over the 2020-2024 time frame. These investments will allow the company to strengthen its existing infrastructure, and serve the expanding gas and electric customer base in a more efficient manner.

The economic condition in WEC Energy’s service territories is improving at a steady pace. Unemployment in Wisconsin remained near record lows, and new investment decision from Amazon AMZN and Foxconn in this region will further increase economic activities and boost demand for WEC Energy’s services.

WEC Energy, under its “Delivering” the Future initiative, is focusing on Natural Gas System Modernization Program, Technology Enhancements, Electric Redesign and Electric Resilience projects. These initiatives will allow the company to strengthen electric and natural gas distribution lines, and benefit from the same.

All these above initiatives will help it to generate enough cash flow to go ahead with shareholder-friendly moves over the long term.

Zacks Rank & Price Movement

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

Shares of the company have gained 21.2% in the past 12 months compared with the industry’s 7.5% growth.

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