Last update on 2024-06-27

WEC Energy Group (WEC) - Dividend Analysis (Final Score: 6/8)

Discover the robust dividend analysis of WEC Energy Group (WEC) with a solid score of 6/8, evaluating stability and performance across key criteria.

Short Analysis - Dividend Score: 6

We're running WEC Energy Group (WEC) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis of WEC Energy Group (WEC) shows a strong performance with a 6 out of 8 score based on an 8-criteria system. WEC has a higher than average dividend yield of 3.7068% compared to the industry average of 3.12%. The average annual dividend growth rate over the last 20 years is an impressive 11.02%. The dividends are generally well-covered by earnings, with a stability trend seen in recent years. Although WEC has experienced fluctuations in its coverage by free cash flow, the overall trend is positive. There was a noticeable drop in dividends in 2017, but WEC has shown consistent and stable payments for over 25 years. The company also has a relatively consistent history of stock repurchases despite some fluctuations and major events.

Insights for Value Investors Seeking Stable Income

Based on the analysis, WEC Energy Group shows strong dividend yield and growth, along with a consistent history of dividend payments. Although there have been some fluctuations in cash flow coverage and a drop in 2017, the general trend is positive. The company's history of stock repurchases adds to its attractiveness. This makes WEC a viable option for investors looking for stable and potentially growing dividend income. However, further investigation into specific events‚ particularly the 2017 dividend drop and cash flow fluctuations‚ is recommended to make a well-informed decision.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the percentage of a company's share price paid to shareholders in the form of dividends annually. It is crucial for evaluating the return on investment from dividends compared to alternative investments.

WEC Energy Group's current dividend yield of 3.7068% surpasses the industry average of 3.12%, indicating a relatively higher income distribution to its shareholders. Historically, WEC's dividend yield has demonstrated an upward trajectory, notably peaking at 4.6934% in 2015 and maintaining an average close to or above the industry's since then. Coupled with consistent dividend per share increases over the years, this trend reflects a strong commitment to returning value to shareholders. Notably, in the face of challenges such as financial crises and market volatility, WEC has sustained or raised its dividend payouts, evidencing robust financial health and stability. This makes it an attractive option for dividend-focused investors.

Average annual Growth Rate higher than 5% in the last 20 years?

Dividend growth indicates the company's ability to increase its dividend payouts consistently. A dividend growth rate of over 5% over 20 years is a strong indicator of financial health.

The average dividend ratio growth for WEC Energy Group over the last 20 years stood at approximately 11.02%, with consistent annual growth rates generally hovering above the critical 5% mark. In certain years, such as 2015, an exceptional growth rate of 54.37% was observed. Equally notable is the negligible dip observed in 2017, where the dividend rate saw a decline of 15.96%. This, however, appears to be an outlier in the overall positive trajectory. Summarily, WEC’s ability to exhibit a sustained average growth momentum of over 11% is indeed promising and augurs well for prospective dividend investors seeking stable, growing returns. This trend can therefore be viewed positively in the context of dividend growth criteria.

Average annual Payout Ratio lower than 65% in the last 20 years?

What the Average Payout Ratio criterion indicates and its importance, especially for WEC Energy Group (WEC).

The payout ratio is a crucial metric for dividend sustainability. A lower payout ratio indicates that a company retains more of its earnings for growth, debt repayment, or operational improvements. A payout ratio consistently below 65% typically suggests a sustainable dividend policy.

Dividends Well Covered by Earnings?

Dividends being covered by earnings is paramount for financial health, indicating sustainable distributions and robust profitability.

WEC Energy Group demonstrates an improving trend in earnings per share (EPS) from 2003 to 2023, rising from $1.0317 to $4.2261. In conjunction, dividends per share (DPS) have also increased from $0.4 to $3.12 in the same period. It's notable that the ratio of dividends to earnings started low, indicating healthy coverage, but spiked around 2015. However, the recent coverage ratio stabilizes over 0.65, positively ensuring dividends are well-supported by earnings. This trend indicates stable dividends benefiting from solid earnings, underlining WEC's financial stewardship and sustainable payout policy.

Dividends Well Covered by Cash Flow?

The ratio of dividends to free cash flow indicates whether the company generates enough cash to cover its dividend payments.

Over the years, WEC Energy Group has experienced fluctuations in its dividend coverage by free cash flow. During several years, particularly 2003 to 2008, the negative values indicate that the company’s free cash flow was not sufficient to cover its dividend payouts, a worrying trend for dividend sustainability. For instance, in 2007, the ratio was -0.172, showing a significant shortfall. However, from 2010 onward, the company’s situation improved, evidenced by positive coverage ratios such as 15.33 in 2010 and 8.79 in 2019, illustrating that the free cash flow was more than enough to cover the dividend payments. The intermittent negative values in 2020 and 2021 reveal temporary shortfalls. Nevertheless, the overall recent positive trend, culminating in a ratio of 1.87 in 2023, suggests a generally improving ability of WEC to cover its dividends from free cash flow, which is crucial for long-term dividend sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over time are crucial for investors, particularly for those reliant on dividend income. Consistent dividend payments demonstrate a company's strong financial health.

Examining the dividend per share from 2003 until 2023, we observe that WEC Energy Group (WEC) has generally increased its dividend payments over the long term. However, in 2017, there is a noticeable drop from $2.475 to $2.08, exceeding the 20% criterion. This indicates a level of instability that might concern income-seeking investors who prioritize steady dividend income. Despite this drop, the overall trend over 20 years still seems positive with an increasing dividend pattern, which partially mitigates the concerns raised by the drop in 2017. Investors should further investigate the reasons behind that specific year's decrease before making a decision.

Dividends Paid for Over 25 Years?

Examining whether a company has consistently paid dividends for over 25 years is essential for evaluating its dividend reliability and financial stability.

WEC Energy Group (WEC) has demonstrated an impressive track record of paying dividends consistently for over 25 years, dating back to 1998. The company's dividend per share has shown a generally upward trend, starting from $0.7775 in 1998 and increasing to $3.12 in 2023. This long history of dividend payments underscores WEC's commitment to returning value to its shareholders and reflects its financial stability. Given this robust dividend history, WEC can be considered a reliable dividend-paying stock, which is a positive trend for income-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a company's confidence in its financial health and its valuation. Repurchasing shares can signal that the company believes its stock is undervalued.

Over the past 20 years, WEC Energy Group has shown intermittent, yet relatively consistent stock repurchase activity. Notable buybacks occurred in years: 2005, 2008, 2009, 2011, 2012, 2013, 2014, 2018, and 2019. The average repurchase rate over the past two decades stands at 1.5812%. This consistency in share repurchases, albeit with fluctuations, suggests that the company has confidence in its operations and views its stock as a good value during these periods. However, the large jump in shares outstanding around 2015 may hint at an acquisition or other major financial event disrupting their buyback consistency. Overall, WEC's long-term repurchase trend is a positive indicator of management's strategic use of capital.