PNM Resources' (NYSE:PNM) Shareholders Will Receive A Bigger Dividend Than Last Year

PNM Resources, Inc.'s (NYSE:PNM) dividend will be increasing from last year's payment of the same period to $0.3675 on 12th of May. This makes the dividend yield about the same as the industry average at 3.0%.

Check out our latest analysis for PNM Resources

PNM Resources' Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, PNM Resources was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. We think that this practice can make the dividend quite risky in the future.

The next year is set to see EPS grow by 46.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

PNM Resources Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.58 in 2013 to the most recent total annual payment of $1.47. This means that it has been growing its distributions at 9.7% per annum 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that PNM Resources has been growing its earnings per share at 15% a year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On PNM Resources' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While PNM Resources is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for PNM Resources you should be aware of, and 1 of them doesn't sit too well with us. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.