Westar Energy Offers 14th Consecutive Annual Dividend Hike, 3% Dividend Yield (WR)
By: Ned Piplovic,
In addition to its 14th consecutive annual dividend hike., Westar Energy, Inc. (NYSE: WR) seems to have reversed a two-year share price decline and is now showing signs of growth.
Several 10%-plus swings throughout 2017 and 2018 kept volatility high in this stock, but the share price has been on a relatively steady uptrend over the past 90 days. Also, Westar has been bolstered by a 14-year history of consecutive dividend increases.
The company’s next upcoming ex-dividend date is on May 29, 2018, so investors who are interested in the long history of dividend payouts and signs of greater stability in the stock should consider adding Westar Energy to their portfolio before then. This would guarantee eligibility for the $0.40 dividend payout on the June 20, 2018 pay date.
Westar Energy, Inc. (NYSE:WR)
Headquartered in Topeka, Kansas and founded in 1922 as the Kansas Power and Light Co., Westar Energy, Inc. operates as an electric utility company that generates, transmits and distributes electricity in Kansas. As of March 2018, the company was the largest electric provider in Kansas, with more than 700,000 customers in 55 out of the 105 state counties. Westar Energy owns over 35,000 miles of transmission and distribution lines, as well as a generation capacity of more than 7,000 megawatts, which uses coal, nuclear fuels, natural gas, diesel and renewable fuels for power generation. The company provides electricity in central and northeastern Kansas, including the cities of Topeka, Lawrence, Manhattan, Salina and Hutchinson, as well as in southeastern Kansas.
A previous iteration of Westar Energy started paying dividends way back in 1924. More recently, between 1999 and 2004, the company cut its annual dividend by nearly two-thirds, only to resume payments with an annual dividend hike every year since then. Over the past 14 years, the company’s total annual dividend has risen more than 110%, which corresponds to an average growth rate of 5.5% per year.
Westar’s current $0.40 quarterly payment represents a 5.3% increase over the $0.38 quarterly distribution from the same period last year. This new quarterly amount converts to a $1.60 annualized payout, or a 3% dividend yield at current prices.
Because the company’s shares declined in value over the past couple of years, Westar’s average yield over the past five years has actually exceeded the company’s long-term average dividend yield. Therefore, the current 3% dividend yield — which is more in line with the company’s long-term average — is 8.3% below the recent average dividend yield over the past five years of 3.3%. Additionally, the current 3% yield is 8.1% higher than the overall average of the entire Utilities sector.
At the beginning of the trailing 12-month period, WR”s share price pulled back a little over 5% before trading sideways for another 60 days or so following the drop. The share price then embarked on steep uptrend and gained more than 15 % between the end of September and the end of November 2017, when the share price reached its 52-week high of $57.
Unfortunately, WR gave back all those gains by early February and dropped to its lowest price in the past 52 weeks, below $49 a share. Since then, shares have regained just about half of their recent losses and closed on May 18, 2018 at $52.85. This closing price is still 8.5% short of the peak price, but it does represent a 2% increase over one year earlier and a 63% increase over five years ago.
While the recent share price drop limited the shareholders’ total return over the past 12 months, the amount was still positive and above 5%, in large part thanks to WR’s recent strength. The rising share price could bring the company’s total returns back in line with its historic levels of approximately 60% over the past three years and 80% over the past five years.
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