Yahoo Finance PNM Resources (NYSE:PNM) Will Pay A Larger Dividend Than Last Year At $0.3675
The board of PNM Resources, Inc. (NYSE:PNM) has announced that it will be paying its dividend of $0.3675 on the 17th of February, an increased payment from last year's comparable dividend. This takes the annual payment to 3.0% of the current stock price, which is about average for the industry.
View our latest analysis for PNM Resources
PNM Resources' Earnings Easily Cover The Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, PNM Resources was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.
The next year is set to see EPS grow by 50.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 52% by next year, which is in a pretty sustainable range.
PNM Resources Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.58 in 2012, and the most recent fiscal year payment was $1.47. This works out to be a compound annual growth rate (CAGR) of approximately 9.7% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Unfortunately, PNM Resources' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Our Thoughts On PNM Resources' Dividend
In summary, while it's always good to see the dividend being raised, we don't think PNM Resources' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for PNM Resources (1 is a bit unpleasant!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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