Wisconsin Energy: A Dividend To Fuel Your Fire

| About: Wisconsin Energy (WEC)

Summer is over, the kids are back in school and, for those of us who live in four-season locales, the daily weather discussion has begun to shift from beach-worthiness to anticipated snow accumulations. Now, those of you in perpetually sunny and warm climates don't need to rush out and buy snow shovels and bags of salt.

But you should pay attention anyway.

You see, I've been told that the Farmers' Almanac is predicting a cold and snowy winter.
And that means the cost of fuel and energy could rise, affecting those in the business of keeping our homes warm. You see, greater demand and higher energy prices could mean bigger profits for some companies and bigger dividends for others.

In that vein, let's take a look at a utility company that pays an inviting and growing dividend.

Power Broker

Wisconsin Energy (NYSE:WEC) has been a solid dividend-paying stock for approximately 70 years and a solid growth stock, as well.

Since 2000, the stock is up more than 400%. But while the pace of earnings growth in the future is in question, there's little doubt that the dividend will continue to go higher.

You see, the company has a stated commitment to dividend increases, which are scheduled to go up by 21% in 2013 to $1.45 per share.

The company has also expressed that it intends to increase the payout ratio to 60% by 2014 and, ultimately, to near the industry standard of 65% to 70% by 2017.

And that's on top of a five-year average dividend growth rate of more than 23%.

This commitment to its dividend is a strategy meant to counterbalance the challenges of operating in a heavily regulated industry - regulations that are expected to inhibit the ability of Wisconsin Energy and its peers to grow as rapidly as they might like.

However, Wisconsin Energy did, in fact, manage to grow in both Q1 and Q2 of 2013 versus 2012.

In Q1 2013, Wisconsin Energy earned $0.76 per share, beating analyst expectations and was better than the prior year's $0.74 per share. Q2 was also better, but by a mere $0.01 ($0.52 versus $0.51).

Unfortunately, the outlook for Q3 is that Wisconsin Energy will report slightly lower earnings when compared with 2012.

And while Wisconsin Energy will likely continue facing challenges down the road, it shares this problem with much of the industry.

The bottom line is that the company will weather the (light) storm, and in the meantime give shareholders value by means other than significant equity growth.

Case in point: In 2012, Wisconsin Energy's board decided to further enhance its commitment to shareholders by enacting a $300-million share repurchase program last year. Wisconsin Energy has already spent more than half of that $300 million, but with the rest still in the pipeline, share value should show little to no downside.

With significant cash flow, and a commitment to its shareholders through increasing dividends and a stock repurchase program, Wisconsin Energy is a long-term, dividend-paying stock to buy and hold.

Safe investing,

Steve Gunn

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.