Public Service Enterprise (PEG) has a strong dividend-paying history, and it has maintained an annual dividend growth rate of 2.6% in the last five years. In 2015, PEG increased its dividends by 5.4% compared to 2014 and paid $1.56 per share. PEG’s management expects a similar dividend growth trend in the near future due to PEG’s healthy business mix and financial position.
The below chart shows the free cash flow and the annual dividends paid during the last eight years. Free cash is generally used for dividends, expansion, or debt.
Conservative investors tend to prefer utilities because of their higher dividend yields and smooth capital appreciation. Public Service Enterprise has a dividend yield of 4% as of January 7, 2016. Utilities (XLU) on an average have a dividend yield near the same level. Leading utility Duke Energy (DUK) has a much higher yield of 4.7% compared to PEG. PEG’s New Jersey competitors Exelon (EXC) and FirstEnergy (FE) have dividend yields near 4.5% as of January 7, 2016. PEG’s forward annual dividend yield is flat at 4%, according to analyst estimates.
Considering the better-than-expected performance in the first nine months of 2015, PEG raised its 2015 full-year operating earnings guidance to $2.85-$2.95 per share. PEG posted operating earnings of $2.76 per share in 2014. PEG aims to achieve and maintain this growth in the coming years by expanding its transmission operations and growing a reliable generation fleet.