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PPL Rewards Shareholders via Dividend Hike, Updates Guidelines

PPL Corporation PPL recently released its financial guidelines, along with the dividend hike approval, on its investor day. In particular, PPL revealed its clean energy strategy, capital investment plans, along with long-term earnings per share (EPS) and dividend growth targets, thereby maintaining one of the strongest balance sheets in the U.S. utility sector.

Guidelines Update

By exiting the U.K. based business, PPL is well-positioned to deliver improved growth prospects, with lower foreign currency and regulatory risks. Also, apart from its inherent organic growth from customer expansion, the net proceeds of $10.4 billion from the sale of the U.K. business must have bolstered the company’s ability to boost its capital spending.

Consequently, PPL pledged to make a robust capital investment plan of $27 billion through 2030. It also expects a five-year capital expenditure plan from 2022 to 2026 at $12 billion to advance grid modernization, grid resiliency and clean energy transition to best serve customers.

The company also plans to cut its operating and maintenance (O&M) costs by $150 million by 2025 compared with the level in 2021 to accelerate the clean energy transition while preserving affordability and earnings growth. Significant O&M savings will support PPL’s expectation of top-tier EPS and dividend growth in the range of 6-8% through 2025, resulting in an annual total return of 9-11% without the need for any rate hikes.

PPL is also making considerable efforts to reduce carbon intensity and emissions by investing in research and development and new technologies, which will accelerate the clean energy transition. The company plans to cut carbon emissions by 70% by 2035 and 80% by 2040 from the 2010 levels by adding more renewable sources to its generation portfolio. Therefore, a compelling opportunity to transit the current coal fleet to greener energy alternatives in Kentucky will support PPL to meet the goal of net-zero carbon emissions by 2050.

Dividend Hike

Banking on its solid balance sheet, PPL announced that its board of directors approved a 12.5% increase in the quarterly dividend rate to 22.5 cents per share. The dividend is payable on Jul 1, 2022 to shareowners of record as of Jun 21, 2022.

PPL expects the dividend payout ratio in the range of 60-65%. In the first three months of 2022, the company paid dividends worth $0.08 billion to shareholders. Currently, PPL has a dividend yield of 2.8% compared with the Zacks S&P 500 composite's average of 1.6%.

Utilities’ Legacy of Dividend Hike

Consistent performance and the ability to generate cash flows allow utilities to reward shareholders with regular dividends. PPL has been paying dividends regularly since 1946. Utilities like Xcel Energy Inc. XEL, WEC Energy Group Inc. WEC and Alliant Energy Corporation LNT, among others, have also been rewarding shareholders with dividend hikes.

Xcel Energy has been paying dividends regularly since 2000. Xcel Energy approved a 6.6% increase in the annual dividend to $1.95 per share. XEL has a current dividend yield of 2.7%, better than the Zacks S&P 500 composite’s yield of 1.6%. The long-term (three to five years) earnings growth of Xcel Energy is 6.4%.

WEC Energy Group has been paying dividends regularly since 1988. WEC Energy Group’s board of directors approved an increase of 7.4% in the annual dividend to $2.91 per share for 2022. WEC has a current dividend yield of 2.9%. The long-term earnings growth of WEC Energy Group is 6.1%.

Alliant Energy has been paying dividends regularly since 1946. Alliant Energy’s board of directors approved an increase of 6% in the annual dividend to $1.71 per share for 2022. LNT has a current dividend yield of 2.9%. The long-term earnings growth of Alliant Energy is 5.7%.

Zacks Rank & Price Performance

Currently, PPL carries a Zacks Rank #5 (Strong Sell). In the past three months, shares of PPL have rallied 8.3% compared with the industry’s 1.2% growth.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research
Zacks Investment Research


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