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Portland General Electric's (NYSE:POR) Dividend Will Be Increased To $0.50

The board of Portland General Electric Company (NYSE:POR) has announced that it will be paying its dividend of $0.50 on the 15th of July, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 4.7%, providing a nice boost to shareholder returns.

Check out our latest analysis for Portland General Electric

Portland General Electric's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Portland General Electric was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. Generally, we think that this would be a risky long term practice.

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Over the next year, EPS is forecast to expand by 31.9%. If the dividend continues on this path, the payout ratio could be 60% by next year, which we think can be pretty sustainable going forward.

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historic-dividend

Portland General Electric Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from $1.10 total annually to $2.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.2% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that Portland General Electric's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Slow growth and a high payout ratio could mean that Portland General Electric has maxed out the amount that it has been able to pay to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Portland General Electric is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Portland General Electric has 4 warning signs (and 1 which is concerning) we think you should know about. Is Portland General Electric not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.