WEC Energy Group (NYSE:WEC) Will Pay A Larger Dividend Than Last Year At $0.78

WEC Energy Group, Inc. (NYSE:WEC) will increase its dividend from last year's comparable payment on the 1st of September to $0.78. This takes the annual payment to 3.6% of the current stock price, which is about average for the industry.

View our latest analysis for WEC Energy Group

WEC Energy Group's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, WEC Energy Group was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. Generally, we think that this would be a risky long term practice.

The next year is set to see EPS grow by 26.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 61% by next year, which is in a pretty sustainable range.

WEC Energy Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.20 in 2013 to the most recent total annual payment of $3.12. This means that it has been growing its distributions at 10% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

WEC Energy Group May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. 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. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, WEC Energy Group has 2 warning signs (and 1 which is concerning) we think you should know about. Is WEC Energy Group not quite the opportunity you were looking for? Why not check out our selection of top 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.