Xcel Shares More with Shareholders - Analyst Blog

By Zacks Equity Research,

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The board of directors of electricity and natural gas company Xcel Energy Inc. ( XEL ) has approved a penny increase to the quarterly dividend of the company. The new quarterly dividend will be 27 cents. The revised dividend is payable on July 20, 2012, to shareholders of record at the close of business on June 21, 2012.

The new annualized dividend rate of the company will be $1.08, reflecting growth of 3.8% from the prior rate of $1.04. The dividend growth rate is at the top end of Xcel Energy's targeted annual growth rate of 2% to 4%. The previous increase in the quarterly dividend rate was on May 18, 2011, when the rate was increased to 26 cents from 25.25 cents.

Xcel Energy continues to register strong financial performance and has accordingly raised the dividend payment rate by more than 3% annually for the last seven years.  This has been possible because of systematic infrastructure investment and growth initiatives undertaken by the company. Xcel Energy has plans to invest $1 billion in Texas and New Mexico over the next five years, which we believe will add to its financial results.

The company is a strong cash flow generator and boasts of a healthy cash balance. Xcel's net cash flow from operating activities in the first quarter of 2012 was $477.5 million, with $119.2 million used for dividend payouts. Cash and cash equivalent as of March 31, 2012 were $99.7 million versus $60.9 million as December 31, 2011.

Xcel Energy recently received the regulatory nod to increase electricity rates across its service territories. Besides, the company has also reduced its operating and maintenance expenses, which will definitely add to profitability. We believe these positive developments will enable the company to meet its annual dividend increase objective.

Xcel Energy currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Another utility operator in the region The ALLETE, Inc. ( ALE ) has maintained its quarterly dividend rate of 46 cents per share.

Based in Minneapolis, Minnesota, Xcel Energy is a U.S. electricity and natural gas company, with operations in eight Western and Midwestern states.

ALLETE INC (ALE): Free Stock Analysis Report
XCEL ENERGY INC (XEL): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: ALE , XEL

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