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PPL’s Dividend: One of the Most Admirable Yields in the Sector

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Nov. 28 2016, Updated 4:05 p.m. ET

PPL’s dividend yield

PPL Corporation (PPL) has a strong dividend payment history, with its yield currently standing at 4.5%. A healthy combination of US and UK regulated operations, along with transmission and distribution rate bases, have facilitated the company’s stable earnings and stable dividend payments. 

However, its bottom line growth in the near future remains exposed to currency headwinds following the Brexit vote.

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Peer comparison

By comparison, PPL’s yield is among the highest in the sector. Top utilities such as Duke Energy (DUK) and Southern Company (SO) are currently trading at respective dividend yields of ~4.5%. Due to their business models, regulated utilities generally obtain relatively stable earnings or pay stable dividends compared to competitive utilities.

PPL’s spin-off of its merchant generation last year turned the company into a pure-play regulated utility, which bodes well for stable earnings and relatively stable dividends. However, the dividend yields of many utilities stocks have fallen over the past couple of quarters.

ETF exposure

The iShares Select Dividend ETF (DVY) is a smart beta fund that aims to generate returns higher than those of the broader market. DVY tracks and holds 100 high dividend–paying companies in the United States. The ETF has exposure of over 30% to utilities. PPL has a near 1% weighting in DVY, making it an attractive investment option for investors seeking high yield and low risk.

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