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DTE Energy Rewards Shareholders with Dividend Hike of 7%

The board of directors of DTE Energy Company DTE approved a 7% increase in its quarterly dividend rate. The revised dividend of 88.25 cents per share will be distributed on Jan 15, 2018, to shareholders of record at the close of business on Dec18, 2017.

The hike in dividend marks an increase of 5.75 cents per share from the previous dividend of 82.50 cents per share and reflects management’s confidence in its long-term growth plans. The new annualized dividend amounts to $3.53, up from $3.30 distributed earlier.

With the current dividend hike, DTE Energy’s new dividend yield stands at 3.18%, much higher as compared to the industry’s average dividend yield of 2.96%, reflecting the board’s commitment toward delivering above-average shareholder returns. The company has paid quarterly cash dividends for more than 100 years now.

Additionally, it revealed plans of maintaining annual dividend hike of approximately 7% through 2020 — higher than the 6% average dividend increase in the past six years.

Dividend Hike Attracts Investors

As investors are always on the lookout for companies with a track record of consistent and incremental dividend payments, regular dividend hikes reflects the company’s solid business strategy of ensuring steady earnings, which in turn encourages them to invest in the stock.

In the first nine months of 2017, the company had returned $495 million to its shareholders through dividend and share buyback compared with $426 million in the year ago period. The hike in dividend will further increase the total payout compared to the last year.

DTE Energy’s capacity to generate cash flows, strong balance sheet and initiatives to achieve its long term earnings goal is helping the management to come out annual dividend increase in the past few years.

Our View

DTE Energy has a well-planned capital expenditure program, which will result in incremental earnings from its regulated operation, paving the way for higher dividend. Toward this, it plans to invest $6.5 billion over the next 10 years for maintaining the reliability of its electric utility grid. Apart from utility, it also continues to make steady progress on its non-utility business, which provides diversity to earnings stream.

The company had an available liquidity of $1.4 billion as of Sep 30, 2017. Cash from operations during the nine months of 2017 was $1,550 million. With such stable financials, the company looks well quipped to execute investor-friendly moves and in this case a dividend hike program.

Price Movement

DTE Energy has outperformed the industry in the last year. The company’s shares gained 20.1%, compared with the industry’s increase of 13.7%.

DTE Energy Company Price and Consensus

This can be attributed to the company’s strong performance in the third quarter, wherein revenues came in at $3,245 million reflecting 10.8% improvement year over year.

Zacks Rank & More Stocks to Consider

DTE Energy currently carries a Zacks Rank #2 (Buy). Investors can consider other top ranked players from the space include WEC Energy Group, Inc. WEC, Otter Tail Corp. OTTR and IDACORP, Inc. IDA carrying the same rank as DTE Energy. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

WEC Energy reported third-quarter 2017 adjusted earnings of 68 cents per share, beating the Zacks Consensus Estimate of 67 cents.

Otter Tail reported third-quarter 2017 adjusted earnings of 45 cents per share, surpassing the Zacks Consensus Estimate of 39 cents.

IDACORP reported third-quarter 2017 adjusted earnings of $1.80 per share, outpacing the Zacks Consensus Estimate of $1.66.

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WEC Energy Group, Inc. (WEC): Free Stock Analysis Report
DTE Energy Company (DTE): Free Stock Analysis Report
IDACORP, Inc. (IDA): Free Stock Analysis Report
Otter Tail Corporation (OTTR): Free Stock Analysis Report
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