WEC Energy Group's (NYSE:WEC) Shareholders Will Receive A Bigger Dividend Than Last Year

WEC Energy Group, Inc. (NYSE:WEC) will increase its dividend from last year's comparable payment on the 1st of March to $0.8925. The payment will take the dividend yield to 3.6%, which is in line with the average for the industry.

Check out our latest analysis for WEC Energy Group

WEC Energy Group's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, WEC Energy Group was paying out quite a large proportion of both earnings and cash flow, with the dividend being 274% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 44.7%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 62% which brings it into quite a comfortable 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. The annual payment during the last 10 years was $1.56 in 2015, and the most recent fiscal year payment was $3.57. This works out to be a compound annual growth rate (CAGR) of approximately 8.6% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, WEC Energy Group has only grown its earnings per share at 3.3% per annum over the past five years. Slow growth and a high payout ratio could mean that WEC Energy Group has maxed out the amount that it has been able to pay to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

WEC Energy Group's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think WEC Energy Group will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for WEC Energy Group (of which 1 is concerning!) 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.