PPL (NYSE:PPL) Is Due To Pay A Dividend Of US$0.41

By
Simply Wall St
Published
November 24, 2021
NYSE:PPL
Source: Shutterstock

The board of PPL Corporation (NYSE:PPL) has announced that it will pay a dividend of US$0.41 per share on the 3rd of January. The dividend yield will be 5.8% based on this payment which is still above the industry average.

Check out our latest analysis for PPL

PPL Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, PPL was paying out 147% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Earnings per share is forecast to rise by 46.1% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 100%, which is a bit high and could start applying pressure to the balance sheet.

historic-dividend
NYSE:PPL Historic Dividend November 25th 2021

PPL 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 first annual payment during the last 10 years was US$1.40 in 2011, and the most recent fiscal year payment was US$1.66. This implies that the company grew its distributions at a yearly rate of about 1.7% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. PPL's EPS has fallen by approximately 16% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

PPL's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about PPL's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for PPL (1 is potentially serious!) 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 performing dividend stock.

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