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Why Is DTE Energy Trading below Its Historical Average?

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DTE Energy’s forward dividend yield

In the previous part of the series, we look at DTE Energy’s (DTE) debt profile. Now let’s have a look at DTE’s forward dividend yield. As of March 29, 2016, DTE is trading at a forward dividend yield of 3.3%. The forward dividend yield of a company is calculated by dividing its estimated one-year future dividend per share by its market price per share.

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Comparing forward yields with peers

Currently, DTE Energy is trading at a discount compared to its own three-year historical forward dividend yield. Its historical forward yield is 4%. Its smooth rally in the last six months could be one of the reasons it’s trading at a yield below its historical average. By comparison, CMS Energy is trading at a forward yield of 3%.

CMS and DTE are both mostly regulated utilities in Michigan. Regulated utilities (IDU) tend to have lower yields compared to unregulated ones since regulated utilities generally have relatively stable earnings. On the other hand, Entergy (ETR) and FirstEnergy (FE) have forward yields near 4.5%. DTE Energy’s growing dependence on its operations that aren’t regulated utilities may trigger volatility in its earnings. This can ultimately increase DTE’s yields.

We’ll see a more comprehensive picture of forward yields and dividend growth of mid-size utilities in the next part of this series.

To learn more about forward yields of regulated utilities, read Regulated Utilities: Trading at Discount to Historical Yields.

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