Albuquerque, NM based electric utility PNM Resources, Inc. (PNM) announced that its board of directors has approved an increase in the quarterly dividend rate by 1.5 cents. The revised quarterly dividend will be 20 cents payable on Feb 13, 2015, to shareholders of record at the close of business on Jan 28, 2015.
The annualized dividend of the company will come to 80 cents, up 8.1% from the prior rate. The current annualized dividend yield is 2.7%, slightly higher than the industry average of 2.2%. The increase in the distributable income speaks of the company’s successfully executed investment growth strategy.
PNM Resources’ dividend payout ratio post increment is 56%. The company targets a dividend payout ratio in the band of 50%–60% over the long term.
The company generally reviews its dividend rate once a year and the board of directors takes into consideration among other things factors like the sustainability of the dividend, funds required for capital investments and industry standards before approving a hike. The previous hike in the quarterly dividend rate was on Dec 2013, when the rate was raised to 18.5 cents from 16.5 cents.
PNM Resources has been a consistent performer with its earnings beating the Zacks Consensus Estimate in three out of the last four quarters. The long-term objective of the company is to ensure earnings growth of 10%–13% over a period of five years (2012 being the base year) and to maintain a competitive dividend payout.
PNM Resources is working on developing its infrastructure and providing better services to its customers. The company plans to invest $2.3 billion over the 2014–2018 time frame.
Cash flow from operating activities at the end of the first nine months of 2014 was $326.2 million compared with $311 million in the year-ago period. During the first nine months, the company utilized $44.6 million for dividend payouts. The strong cash flow generating capability will aid the company to fund incremental dividends.
PNM Resources currently has a Zacks Rank #2 (Buy). Other well-ranked stocks in the space include Black Hills Corporation (BKH), PG&E Corporation (PCG) and ALLETE Inc. (ALE). Black Hills Corporation and PG&E Corporation sport a Zacks Rank #1 (Strong Buy), while ALLETE Inc. has a Zacks Rank #2 (Buy).
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