WEC Energy Group's (NYSE:WEC) Upcoming Dividend Will Be Larger Than Last Year's

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 September. Based on this payment, the dividend yield for the company will be 3.4%, which is fairly typical for the industry.

Check out our latest analysis for WEC Energy Group

WEC Energy Group's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 24.9%. If the dividend continues on this path, the payout ratio could be 62% by next year, which we think can be pretty sustainable going forward.

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. The annual payment during the last 10 years was $1.20 in 2013, and the most recent fiscal year payment was $3.12. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. 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% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

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

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. To that end, WEC Energy Group has 2 warning signs (and 1 which is 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.