Stock Analysis

DTE Energy (NYSE:DTE) Is Paying Out A Larger Dividend Than Last Year

NYSE:DTE
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DTE Energy Company's (NYSE:DTE) periodic dividend will be increasing on the 15th of January to $0.9525, with investors receiving 7.6% more than last year's $0.885. This takes the annual payment to 3.1% of the current stock price, which is about average for the industry.

View our latest analysis for DTE Energy

DTE Energy's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, DTE Energy was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 21.1% over the next year. If the dividend continues on this path, the payout ratio could be 54% by next year, which we think can be pretty sustainable going forward.

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NYSE:DTE Historic Dividend November 14th 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was $2.35 in 2012, and the most recent fiscal year payment was $3.54. This means that it has been growing its distributions at 4.2% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, DTE Energy's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. DTE Energy is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On DTE Energy's Dividend

In summary, while it's always good to see the dividend being raised, we don't think DTE Energy's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for DTE Energy (of which 1 makes us a bit uncomfortable!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.