Public Service Enterprise Group (NYSE:PEG) Is Due To Pay A Dividend Of $0.60

The board of Public Service Enterprise Group Incorporated (NYSE:PEG) has announced that it will pay a dividend of $0.60 per share on the 31st of December. This takes the annual payment to 2.6% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Public Service Enterprise Group

Public Service Enterprise Group's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Public Service Enterprise Group was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 8.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which is in the range that makes us comfortable with the sustainability of the dividend.

Public Service Enterprise Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $1.48, compared to the most recent full-year payment of $2.40. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Public Service Enterprise Group has been growing its earnings per share at 7.2% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Public Service Enterprise Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think Public Service Enterprise Group will make a great income stock. While Public Service Enterprise Group is earning enough to cover the payments, the cash flows are lacking. 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. To that end, Public Service Enterprise Group has 3 warning signs (and 1 which is potentially serious) we think 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.