Wisconsin Energy Corporation
) has decided to share more profits with its shareholders. The
board of directors has approved of a hike in Wisconsin Energy's
quarterly dividend rate to 39 cents per share from the current
payout of 38.25 cents per share.
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The increased dividend will be paid on Mar 1, 2014, to
shareholders of record on Feb 14, 2014. The new annualized
dividend rate of $1.56 per share reflects growth of 1.96% from
the previous payout of $1.53 per share.
The current dividend yield of the company is 3.79%, which is
higher than the industry average of 2.13%. The dividend payout
ratio, trailing twelve months, is at 58.38%, which also exceeds
the industry average of 37.84%. The company targets a lofty
dividend payout ratio of 65-70% by the end of 2017. The current
hike will take Wisconsin Energy a step closer to that long-term
In the first nine month of 2013, the company disbursed $242.3
million as dividends. If the share count remains unaltered from
the third quarter, Wisconsin Energy needs an additional $17
million to pay the increased dividend. The free cash flow of the
company at the end of the aforesaid period was $552.6 million,
which we believe is more than enough to support the increased
Wisconsin Energy has been performing well and its earnings per
share have exceeded our expectation in the preceding four
quarters with an average earnings beat of 7.43%.
Utility operators are fundamentally defensive stocks due to the
regulated nature of their business. Utilities hardly come out
with large earnings surprises but are consistent performers and
regularly distribute a portion of their profits to shareholders.
Wisconsin Energy has been consistently doing so for more than the
past seven decades.
We believe these fundamental strengths will help the company to
attract income oriented investors at a time when the company
needs to generate additional funds for capital investments.
Wisconsin Energy currently has a Zacks Rank #1 (Strong Buy).
Other players in the utility space, which look well placed at
current levels, include
Korea Electric Power Corp.
National Grid plc
NRG Yield, Inc.
). All these stocks carry the same Zacks Rank as Wisconsin