OGE Energy's (NYSE:OGE) Upcoming Dividend Will Be Larger Than Last Year's

The board of OGE Energy Corp. (NYSE:OGE) has announced that it will be paying its dividend of $0.4213 on the 31st of January, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 4.0%, which is in line with the average for the industry.

Check out our latest analysis for OGE Energy

OGE Energy's Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, OGE Energy's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Looking forward, earnings per share is forecast to rise by 29.9% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 71% which would be quite comfortable going to take the dividend forward.

OGE Energy Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.90 in 2014 to the most recent total annual payment of $1.69. This means that it has been growing its distributions at 6.5% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

OGE Energy May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. OGE Energy has seen earnings per share falling at 3.1% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

OGE Energy's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think OGE Energy will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, OGE Energy has 2 warning signs (and 1 which is significant) we think you should know about. Is OGE Energy not quite the opportunity you were looking for? Why not check out our selection of top 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.