WEC Energy Group (NYSE:WEC) Is Increasing Its Dividend To $0.78

WEC Energy Group, Inc. (NYSE:WEC) will increase its dividend from last year's comparable payment on the 1st of March to $0.78. Based on this payment, the dividend yield for the company will be 3.4%, which is fairly typical for the industry.

See our latest analysis for WEC Energy Group

WEC Energy Group's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, WEC Energy Group's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. 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.

Looking forward, earnings per share is forecast to rise by 18.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 61%, which is in the range that makes us comfortable with the sustainability of the dividend.

WEC Energy Group 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. Since 2013, the dividend has gone from $1.20 total annually to $3.12. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

WEC Energy Group Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that WEC Energy Group has grown earnings per share at 7.4% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On WEC Energy Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think WEC Energy Group's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. 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 3 warning signs for WEC Energy Group you should be aware of, and 1 of them is potentially serious. 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.