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Factors that Could Drive the Dividend Growth of EIX


Mar. 1 2018, Published 12:22 p.m. ET

What is the dividend outlook for EIX?

Edison International’s (EIX) dividend yield of 4.0% has been driven by its dividend growth and price loss. Its dividend grew 15.0% and 13.0% in 2016 and 2017, respectively. Its price loss since 2017 also contributed to its yield growth, and its dividend is projected to grow 12.0% in 2018.

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What is the projected dividend payout for EIX?

Edison International (EIX) had a dividend payout of 48.0% in 2016. It has projected dividend payouts of 50.0% in 2017 and 57.0% in 2018. However, the company’s high capital expenditures relative to its operating cash flow has led to negative free cash flows.

What drove EIX’s operating revenue growth?

Edison International’s (EIX) operating revenues grew 3.0% and 1.0% in 2016 and 9M17, respectively. Its growth in 2016 and 9M17 was driven by higher authorized revenues from the escalation mechanism pertaining to the 2015 General Rate Case decision.

EIX’s revenue growth was offset by lower California Public Utilities Commission revenues related to previous overcollections and higher net financing costs.

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What drove the core EPS growth of EIX?

Edison International’s power and fuel costs rose 6.0% and 5.0% in 2016 and 9M17, respectively. As a result, its gross profit expanded 1.0% and fell 1.0% in 2016 and 9M17, respectively.

EIX’s operating expenses remained flat in 2016 and fell 1.0% in 9M17. This translated into 4.0% growth in its 2016 operating income followed by a 1.0% fall in 9M17.

Edison International’s other net expenses rose 14.0% and 7.0% in 2016 and 9M17, respectively, driven by interest expenses. These factors led to a 3.0% decline in its core earnings for 2016 followed by 13.0% growth in 9M17. Its core EPS (earnings per share) fell 3.0% in 2016 before growing 14.0% in 9M17. The share buybacks have enhanced the company’s EPS numbers for 9M17.

What could drive the future operating revenue and core EPS?

Edison International’s (EIX) initiatives include grid modernization at Southern California Edison, installations of grid battery storage, transportation electrification, and building of new businesses in energy services. These initiatives are geared toward achieving a cleaner environment, reduced energy costs, lower dependency on nonrenewable energy sources, and minimized energy cost volatility.

EIX’s operating revenues have been projected to grow 4.0% in 2017 and 2.0% in 2018. Its core earnings per share are expected to grow 8.0% in 2017 and fall 1.0% in 2018.

EIX’s price-to-earnings (or PE) ratio of 15.5x and dividend yield of 4.0% compared to a sector average PE and a dividend yield of 58.6x and 3.7%, respectively.

Dividend ETFs

The dividend ETFs with exposure to EIX include the SPDR Portfolio S&P 500 High Dividend ETF (SPYD), which has a PE ratio of 16.8x and a dividend yield of 3.9%. The Vanguard Dividend Appreciation ETF (VIG) has a PE ratio of 23.5x and a dividend yield of 1.9%.


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