Historical Dividend Growth of 10 Top-Yielding SPX Utilities
Let’s have a look at the historical dividend growth of utilities under our consideration. On an average, utilities increased their per-share dividends by ~4%, compounded annually, in the last five years. Only two utility stocks from our ten top-yielding utilities surpassed this average.
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Can utilities maintain higher dividend growth?
Leading regulated utility stocks Duke Energy (DUK) and Georgia-based Southern Company (SO) raised their per-share dividends 2.5% and 3.6%, respectively, compounded annually. Both utilities witnessed sluggish electricity demand growth, which flattened their earnings in the last few years. This trend may have led to their relatively lower dividend growth.
FirstEnergy (FE), one of the leading competitive utilities, has not increased its dividends since 1Q14. FE trimmed its per-share dividends from $0.55 to $0.36 in 1Q14. Its five-year annual dividend growth was about -3%. Natural gas prices fell significantly in 2014, which also dented competitive power prices.
Competitive utilities have been struggling since 2014. Entergy’s (ETR) dividends rose 0.6%, compounded annually, in the last five years. Public Service Enterprise Group (PEG) has raised its dividend 3.7%, compounded annually, in the last five years.
AES Corporation (AES) started paying dividends in 2012. Its per-share dividend growth rate during this period was 40%, compounded annually.
Dominion Energy (D) has displayed handsome dividend growth during this period and increased its dividend 7.3%, compounded annually. Dominion Energy’s higher earnings growth in the last five years facilitated its higher dividend growth.
In comparison, renewables giant NextEra Energy (NEE), which forms more than 10% of the Utilities Select Sector SPDR ETF (XLU), displayed the highest dividend growth among its peers. In the last five years, NEE’s dividends grew 10%, compounded annually. However, it currently yields 2.6%. You can read more about its dividend profile in NextEra Energy’s Dividend Profile Is Smart despite Lower Yield.