OGE Energy Corp. (NYSE:OGE) will pay a dividend of $0.4182 on the 26th of July. Based on this payment, the dividend yield on the company's stock will be 4.7%, which is an attractive boost to shareholder returns.
See our latest analysis for OGE Energy
OGE Energy's Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, OGE Energy was paying out quite a large proportion of both earnings and cash flow, with the dividend being 1,401% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.
The next year is set to see EPS grow by 23.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 73%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
OGE Energy Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.835, compared to the most recent full-year payment of $1.67. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
OGE Energy May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Although it's important to note that OGE Energy's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about OGE Energy's payments, as there could be some issues with sustaining them into the future. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for OGE Energy (1 is concerning!) that you should be aware of before investing. 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.
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About NYSE:OGE
Average dividend payer with questionable track record.
