Energy utility, Wisconsin Energy Corporation (WEC) has decided to share more profits with its shareholders. The Board of Directors announced its intention to increase the quarterly dividend rate to 30 cents per share from the current payout of 26 cents per share.
The new quarterly dividend of 30 cents is expected to be distributed on March 1, 2012, to shareholders of record on February 14, 2012. The new annualized dividend rate of $1.20 per share will reflect a growth of 15.4% from the previous annual rate of $1.04 per share.
Wisconsin will need another $9.4 million per quarter to pay the increased dividend to its shareholders if the share count remains unaltered. Year-to-date free cash flow of the company is $215.4 million, which will support the increased payment.
The dividend payout ratio of the company, trailing twelve months, is 43.6%. The company targets a dividend payout ratio of 60% by the end of 2015 and this hike is a step closer to that long-term goal.
Wisconsin Energy has a consistent track record of paying quarterly dividends. The prior dividend of 26 cents was paid on March 2011 on a stock-split adjusted basis.
Wisconsin Energy has been performing well and its earnings per share have exceeded our expectation in the preceding four quarters. On top of it Wisconsin’s long-term “Power the Future” plan has been a major hit and added 3 cents to earnings in the third quarter 2011.
The market also reacted positively to the dividend hike announcement. Yesterday’s closing price of $33.26 reflected a 0.24% spurt from the previous day’s close.
We believe that in a highly regulated utility industry, consistent dividend payment is a sure shot way to keep the investors interested in the stock. The increased dividend payment also helps to attract new investors in a time when the company needs to generate additional funds for capital investments.
Wisconsin Energy retains a Zacks #2 Rank, which translates into a short-term Buy rating. The company competes with Xcel Energy Inc. (XEL), which also has a Zacks #2 Rank.
Based in Milwaukee, Wisconsin, Wisconsin Energy, through its subsidiaries, generates and distributes electricity in Southeastern, East Central, and Northern Wisconsin, as well as in the Upper Peninsula of Michigan. The company also distributes natural gas.
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