Edison International’s EIX board of directors recently announced its decision to increase quarterly dividend rate by 4.1%. The revised dividend of 63.75 cents per share will be distributed on Jan 31, 2020, to its shareholders of record at the close of business on Dec 31, 2019.
The latest hike marks an increase of 2.50 cents from the prior payout of 61.25 cents per share. The new annualized dividend amounts to $2.55 per share, up from $2.45 paid earlier.
Backed by the latest dividend hike, the company’s current annual dividend yield stands at 3.57% compared with the industry’s 2.89% and the Zacks S&P 500 composite’s average yield of 1.82%.
Notably, this is the 16th consecutive year of a dividend hike by Edison International's management.
Solid Cash Flow Boosts Dividend Hike
With a strong portfolio of regulated utility assets and well-managed merchant energy operations, Edison International presents a lower risk profile than its utility-only peers.
In particular, Edison International's ability to pay dividends on its common stock is primarily dependent on the earnings and cash flows coming from its primary subsidiary, Southern California Edison (SCE). In this regard, it is imperative to mention that in third-quarter2019, SCE core activities contributed 7 cents to the company’s overall earnings.
Such solid bottom-line performance gets translated into strong cash generation capability, which in turn, enables a company to make smooth dividend payments. Notably, as of Sep 30, 2019, this Zacks Rank #2 (Buy) stock had cash and cash equivalents of $547 million compared with $144 million at 2018 end. You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Going forward, Edison International’s management plans to increase its dividend above industry average growth rate toward its target payout ratio of 45-55% of SCE earnings. This initiative is expected to bolster dividend growth at a faster pace than SCE's earnings growth, apart from allowing the company to boost investor interest in the stock.
Impressively, SCE currently intends to invest $8.90-$9.10 billion between 2019 and 2020 for grid modernization besides expansion of its distribution and transmission facilities. This will entitle Edison International to offer more safe and reliable electricity, in a greater amount, enabling it to meet its dividend payout goals.
Dividend Hikes in the Utilities Sector
Utilities sector provides basic services like electric, water and gas. Consistent demand for these services has enabled companies in this sector to maintain steady earnings and cash flow. This helps the companies to rewardshareholders with regular dividend payouts. Keeping this trend alive, apart from Edison International, other utility players have raised their dividends in recent times.
On Dec 9, AES Corp
AES announced that its management has approved a 5% hike in its first-quarter 2020 common stock quarterly dividend to 14.33 cents, taking the annualized payout to 57.32 cents per share. On Dec 5, WEC Energy Group ( WEC Quick Quote WEC - Free Report) announced that it is planning to hike the quarterly dividend to 63.25 cents per share from the present level of 59 cents. Earlier in November, The York Water Company’s YORW board of directors announced a hike in the quarterly dividend to 18.02 cents per share, up 4% from the previous rate. Price Movement
In a year’s time, shares of Edison International have gained 20% compared with the
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