WEC Energy Group's (NYSE:WEC) Dividend Will Be Increased To $0.78

WEC Energy Group, Inc. (NYSE:WEC) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of June to $0.78. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.

View our latest analysis for WEC Energy Group

WEC Energy Group's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, WEC Energy Group was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 17.8% 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 an extended history of paying stable dividends. Since 2013, the annual payment back then was $1.20, compared to the most recent full-year payment of $3.12. This means that it has been growing its distributions at 10% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

WEC Energy Group May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 3.2% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 3.2% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

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. 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.

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 a bit concerning) we think 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.