Dividend stocks are popular amongst investors due to the potential for high yields in the long-term. There are plenty of companies out there that pay out dividends to investors, but some are a better option than others. It is important to assess various aspects of a company before deciding to invest, such as its history, its stability, and the future potential of a company. One company in which you may consider investing is PPL Corporation (NYSE:PPL). Here is an overview of this company and why it is a sound dividend stock for long-term investment.
What You Need to Know
PPL Corporation is an energy company based in Pennsylvania that delivers electricity to 10.5 million customers across Pennsylvania, Kentucky, and Great Britain. It also delivers natural gas to 321,000 customers in Kentucky. The company was founded in 1920, and its president, chairman, and chief executive officer is William H, Spence. The fact that this company has been in business for almost 100 years is one reason that it is a good investment. It has a long history and is well-established in the utility industry. Being a part of this industry is a second factor that makes it a stable option for investment. This is an industry that has a constant demand as customers always need energy. Industry regulations add to the stability of the major players in the utility sector.
Furthermore, PPL Corporation’s diversification into natural gas rather than just electricity has given the company even greater stability. There is an increasing demand for natural gas supplies, and this contributes to an optimistic outlook for PPL Corporation over the next decade. Also, there is a move away from dirty sources of energy, such as coal, and a move towards clean energy, such as natural gas. Therefore, it is significant that PPL Corporation is making steps in the right direction, although they are a little behind some of the larger utility companies in making the move towards a focus on clean energy. Another reason why this company is a stable investment option is that PPL Corporation has expanded its geographical customer base to include customers from the United Kingdom. This is since the acquisition of E.ON’s distribution company Central Networks back in 2011. Approximately 60 percent of the company’s electricity customers are in the United States, while the remaining 40 percent are in the United Kingdom. Even though PPL Corporation is a smaller company than many of its competitors, this split customer base makes it stand out from its competitors.
Of course, what many investors are interested in is a company’s dividend payout history, whether it delivers high yields, and the potential dividend payouts they will receive in the future. PPL has a long and solid history of dividend payouts. According to The Motley Fool, the dividend payout rate has consistently increased for the last 17 years. Looking at the rate of this increase over the last decade, it has grown in line with the rate of inflation. Even if it doesn’t grow, this trend shows that investors’ buying power is protected. It is also in the group of companies that consistently delivers payouts over five percent, with current payout rates higher than seven percent.
It is worth noting that PPL Corporation is spending $15 billion on its growth plans between 2018 and 2022. Due to this investment, the company’s management expects a growth rate of around five or six percent in the next two years. In turn, this will support dividends tracking inflation and maintain the buying power of investors over time. This positive rate of growth is good for both the company and for investors. Simply Wall Street notes that it is important to look at a company’s cash flow to determine if they can continue to support paying out increasing dividends to investors in the future. PPL paid out 63 percent of its profits to investors in 2018. In the past, they have aid out more than 70 percent of their profits. In terms of cash flow, PPL Corporation reported negative cash flow in 2018, but this is not a long-term situation for the company.
The volatility of dividends is another consideration. Looking at the current cash flow and the dividend history of the company can help to predict future dividend trends and the potential for growth. If a company struggles financially, then your dividends will shrink and your investment declines. The history of PPL Corporation in the last decade shows that this is not a volatile dividend stock due to its slow and steady growth and the company’s stability. While this may seem a boring option, its stable history is impressive enough to make it a solid option. According to NASDAQ Dividend Channel has named PPL Corporation as a top 10 dividend-paying utility stock. In their report, Dividend Channel compared PPL Corporation to other companies in the utility sector. They noted that PPL Corporation displays both strong profitability metrics and attractive valuation metrics. Other key fundamental data points that were mentioned in the report were the favorable long-term multi-year growth rates and the strong quarterly dividend history. Like other financial experts and analysts, they noted the solid dividend payout history of the company.
Overall, there are several factors that make PPL Corporation a solid dividend stock option to add to your portfolio. This company has a good growth outlook over the next couple of years and the company has a consistent history of dividend payouts and payout growth that is beating inflation. The inexpensive share price makes this an option worth considering now. The high yields and the positive predictions for the company mean that PPL Corporation is a solid, if not exciting, dividend stock option for the long-term. Most financial experts agree that an investment in this company is a sound option.
Written by Bill Vix
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