The Board of Directors of
Pinnacle West Capital Corp.
) approved a quarterly dividend hike of 4% or 2.25 cents to 56.75
cents per share. This brings the annual dividend to $2.27 per
share, reflecting a yield of 3.95%, substantially higher than the
industry average of 1.98%.
The revised dividend will be payable on Dec 2, 2013, to
shareholders of record on Nov 1, 2013. An increasing cash balance
and a healthy operating cash flow position have triggered the
hike in dividend.
The company maintained a constant dividend payout during the
economic recession. In Oct 2012, the company increased its
dividend by 3.8% to 54.5 cents per share from 52.5 cents per
Other utility companies that have raised their quarterly
dividend in 2013 include
) which increased quarterly dividend by 13.2%,
American Electric Power Company Inc.
) which boosted quarterly dividend by 2% and
) which augmented dividend by 6%.
Pinnacle West's cash balance rose 6.1% to $27.8 million as of
Jun 30, 2013 from $26.2 million as of Dec 31, 2012. In the first
half of 2013, the company utilized $116.2 million for dividend
payment. In addition, the strong cash flow position which was
$454.3 million in the first half of 2013 will enable the company
to easily meet the increased dividend burden.
Pinnacle West's high-growth solar projects, a steady recovery
in the Arizona economy and a concomitant rise in the customer
base were the main performance drivers. These factors have led
the company to report earnings surprises in three out of the last
four quarters, with an average beat of 54.70%.
We believe Pinnacle West's flagship AZ Sun program and
systematic investments in transmission assets will help the
company to register solid performance as well as aid in achieving
its annual dividend growth target of 4% in the coming years.
However, the ongoing water scarcity issues in the U.S. of
which Arizona is a part might create operational difficulties as
Pinnacle West's generating plants require considerable supplies
of water. At the moment, the company carries a Zacks Rank #3
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