Tampa, FL based utility TECO Energy Inc. ( TE ) announced that its board of directors has approved of an increase in the quarterly dividend rate by 0.5 cents. The revised quarterly dividend will be 22.5 cents, payable on Mar 2, 2015, to shareholders of record at the close of business on Feb13, 2015.
The annualized payout amounts to 90 cents, up 2.3% from the prior rate. The current annualized dividend yield is 4.19%, higher than the industry average of 2.15%. The increase in distributable income speaks of the company's successfully executed investment growth strategy. The company targets a dividend payout ratio in the band of 60-70% over the long term.
The increase in TECO Energy's dividend rate came after a break of three years. The previous hike was made in 2012, when the annual rate was raised by 2.3% to 88 cents. The utility has however paid dividends consistently, this being the 91st consecutive year.
The economy in TECO Energy's service territories - Florida and New Mexico - has been showing consistent signs of improvement. The unemployment rate in these two states was down to 5.6% and 6.1% in Dec 2014 from 6.2%% and 6.6% respectively in Jan 2014. Job creation will definitely boost the demand for electricity and natural gas, benefiting this utility.
TECO Energy has been performing consistently with its earnings beating the Zacks Consensus Estimate in three out of the last four quarters. Cash flow from operating activities at the end of the first nine months of 2014 was $506.2 million, in line with the year-ago period. During the first nine months of 2014, the company utilized $147.5 million for dividend payouts. The strong cash flow generating capability will aid the company to fund incremental dividends.
TECO Energy currently has a Zacks Rank #3 (Hold). Other better-ranked stocks in the space include Huaneng Power International, Inc. ( HNP ), Calpine Corp. ( CPN ) and Consolidated Edison, Inc. ( ED ). Huaneng Power sports a Zacks Rank #1 (Strong Buy), while Calpine Corp. (CPN) and Consolidated Edison, Inc. have a Zacks Rank #2 (Buy).
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