Portland General Electric (NYSE:POR) Is Increasing Its Dividend To $0.50

Portland General Electric Company (NYSE:POR) will increase its dividend on the 15th of July to $0.50, which is 5.3% higher than last year's payment from the same period of $0.475. This takes the dividend yield to 4.4%, which shareholders will be pleased with.

See our latest analysis for Portland General Electric

Portland General Electric's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Over the next year, EPS is forecast to expand by 46.2%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 62% which brings it into quite a comfortable range.

Portland General Electric Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $1.10 in 2014 to the most recent total annual payment of $1.90. This implies that the company grew its distributions at a yearly rate of about 5.6% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Portland General Electric May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Portland General Electric hasn't seen much change in its earnings per share over the last five years.

We should note that Portland General Electric has issued stock equal to 13% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Portland General Electric's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Case in point: We've spotted 3 warning signs for Portland General Electric (of which 1 is a bit unpleasant!) 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.