MGE Energy's (NASDAQ:MGEE) Dividend Will Be Increased To $0.4275
The MGE Energy, Inc. (NASDAQ:MGEE) committee has recently revealed that the dividend scheduled for September 15th will be upped to $0.4275, representing a 4.9% increase compared to the payment made during the same period last year, which amounted to $0.408. Despite this rise in the dividend, the current yield stands at merely 2.2%, placing it below the standard for the industry.
Take a look at our most recent examination of MGE Energy.
MGE Energy's Profits Secure Distributions
The payout rate of dividends may be somewhat small, yet it is also crucial to consider the long-term viability of income stocks. Looking at the latest payment, MGE Energy's earnings significantly surpassed the dividend, although they failed to convert those earnings into actual cash. A lack of cash flow can certainly pose difficulties in distributing funds to shareholders, or even put strain on the company's financial health.
In the upcoming year, it is projected that the earnings per share will increase by 16.7%. If the dividend follows its current pattern, we believe the payout ratio could reach 47% by next year, which is considered to be within a reasonably sustainable range.
MGE Energy's Reliable Track Record
The company has consistently paid dividends with minimal variation. From 2013 to now, the dividend amount has increased from $1.05 to $1.63 per year. This indicates that the company has experienced a modest growth rate of around 4.5% per year over this period. While we cannot dismiss the fact that the dividend has been remarkably steady in the past, the growth has been quite restrained.
Challenges Ahead For MGE Energy's Dividend Growth
Certain investors will eagerly be waiting to purchase some of the company's stock solely because of its track record in paying dividends. MGE Energy has experienced minimal fluctuations in its earnings per share in the past five years. Due to the company's difficulty in identifying profitable investments, it is allocating a larger portion of its earnings to shareholders. Although this is not inherently negative, it does indicate that the potential for dividend growth may be limited going forward unless there is a resurgence in earnings.
In general, this may not be an ideal stock for generating income, despite the fact that the dividend is currently increasing. Although the low payout ratio is a positive aspect, it is counterbalanced by the limited amount of cash available to fulfill the dividend payments. If your main goal is to earn income, we do not believe that MGE Energy is a strong stock to consider adding to your investment portfolio.
It is worth mentioning that companies that maintain a steady dividend policy will instill more trust in investors compared to those with an inconsistent approach. Nevertheless, there are other factors to ponder upon while assessing the performance of a stock. Specifically, we have identified two red flags for MGE Energy that investors ought to be aware of before investing their money into this stock. In case you are an investor interested in dividends, you may also want to explore our hand-picked collection of stocks that offer high yields in dividends.
Simplifying Valuation: Our Expertise
Discover if MGE Energy could be considered as over or undervalued by exploring our detailed examination, encompassing assessments of fair value, potential risks, cautionary signs, dividend payouts, insider deals, and financial stability.
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This blog post from Simply Wall St is of a general nature. We offer analysis and insights based on past information and predictions from analysts, using a fair approach. Please note that our articles do not serve as financial advice. They do not suggest buying or selling any stocks and do not consider your goals or financial circumstances. Our goal is to provide in-depth analysis focused on the long-term and supported by fundamental data. It's important to remember that our analysis may not take into account the most recent company announcements or qualitative information that may impact stock prices. Simply Wall St does not hold any positions in the stocks mentioned.
