WEC Energy Group (NYSE:WEC) Is Paying Out A Larger Dividend Than Last Year

WEC Energy Group, Inc.'s (NYSE:WEC) dividend will be increasing from last year's payment of the same period to $0.78 on 1st of June. This makes the dividend yield about the same as the industry average at 3.2%.

See our latest analysis for WEC Energy Group

WEC Energy Group's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, WEC Energy Group's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 24.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 60% by next year, which is in a pretty sustainable range.

WEC Energy Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $1.20 total annually to $3.12. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

WEC Energy Group 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. Unfortunately, WEC Energy Group's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.8% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On WEC Energy Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think WEC Energy Group will make a great income stock. While WEC Energy Group is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for WEC Energy Group (1 is concerning!) that you should be aware of before investing. 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.