Yahoo Finance Public Service Enterprise Group (NYSE:PEG) Will Pay A Dividend Of $0.60
The board of Public Service Enterprise Group Incorporated (NYSE:PEG) has announced that it will pay a dividend on the 28th of June, with investors receiving $0.60 per share. The payment will take the dividend yield to 3.7%, which is in line with the average for the industry.
View our latest analysis for Public Service Enterprise Group
Public Service Enterprise Group's Payment Has Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last dividend, Public Service Enterprise Group is earning enough to cover the payment, but then it makes up 249% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
EPS is set to fall by 17.8% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 58%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Public Service Enterprise 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 $1.44 in 2014, and the most recent fiscal year payment was $2.40. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Public Service Enterprise Group has seen EPS rising for the last five years, at 12% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Public Service Enterprise Group's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Public Service Enterprise Group (of which 2 are significant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
