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Analyzing PPL’s Earnings and Dividend Growth Going Forward

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PPL: Dividend outlook

PPL Corporation’s (PPL) 4% per year dividend increase is on the lower side compared to its peers. PPL management aims for a per share earnings growth of 5%–6% per year for the next few years.

PPL’s operations in the United Kingdom are responsible for more than half of its total earnings. The rest of its earnings come from Kentucky and Pennsylvania. Its distribution and transmission operations in both of these states could likely improve its earnings growth due to increased capital spending.

PPL stk

Brexit woes

PPL’s heavy exposure to the United Kingdom made it vulnerable to the Brexit. That could have a negative impact on the utility’s cash flows, considering the volatile exchange rates. However, the company’s hedging strategies and its comparatively sturdier domestic performance are expected to offset the impact to some extent.

The chart above shows a comparative stock price movement of PPL along with the broader markets (SPX-INDEX) (SPY) and the S&P 500 Utilities Index (XLU).

Considering total returns (including dividends), PPL returned 15% in the last year, while in the last five years, it returned 11% compounded annually. In comparison, the Utilities Select Sector SPDR ETF (XLU) returned 20% in the last year. In the last five years, its returns were 14% compounded annually.

The utilities sector is currently one of the top yielding sectors among the broader equities. You can read about the top ten yielding S&P 500 utilities stocks in Market Realist’s series Sector Scan: The 10 Top-Yielding SPX Utility Stocks.

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