Wisconsin Energy Group: WEC Stock Dividend Analysis

WEC Stock Is A Winner For Slow & Steady Investment Returns

WEC stock plus the WEC stock dividend is one of the most stable stocks and dividend combinations you can find.

So, let’s work through a WEC dividend stock analysis. Because WEC is a member of our dividend stock model portfolio. So, I want to check in on the WEC dividend history, dividend growth rate, and much more.

Let’s not delay. And get on with our WEC stock analysis and dividend assessment…

Wisconsin Energy Group (WEC) dividend stock analysis

Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

WEC Stock Dividend Analysis: Key Takeaways

1. Wisconsin Energy is a stable, steady, and consistent dividend growth stock. Operating in the U.S. regulated utility sector.

2. It has a ~ 3% dividend yield. And 5-7% projected dividend growth potential based on my review. Management believes earnings will grow 5-7% annually over the next few years. Keeping the dividend payout ratio at a constant rate.

3. As of the time of this update, the stock looks fully valued.

4. Assuming the company is successful at executing its business plans. An investor can reasonably expect 8-10% total returns over the long run.

5. I have a small position in WEC stock. As part of my dividend growth stock portfolio. And currently, rate it as a “buy on price weakness” for my personal investment decision-making. I’m seeking a dividend yield above 3% on any new purchases.

Are you like me and always on the hunt for new dividend stocks to invest in? If yes. Then, I have a couple of “go-to” sources I would like to suggest.

First, there is the Simply Investing report. It focuses on both U.S.-based and Candian-based companies that pay regular dividends.

I also like the Motley Fool Stock Advisor. For its insightful stock reviews and recommendations.

Okay. With those highlights and thoughts taken care of. Let’s get into the details.

Starting with some background on today’s focus company, Wisconsin Energy Group.

WEC Company Background

WEC, a Fortune 500 company, is one of the largest electric generation, distribution, and natural gas delivery holding companies in the United States.  They provide energy services to more than 4.5 million customers in Wisconsin, Illinois, Michigan, and Minnesota.

WEC operates:

  • 70,000+ miles of electric distribution lines
  • 50,000+ miles of natural gas transmission lines
  • 7,000+ megawatts of power plant capacity

WEC Operating Units

WEC does business through a number of energy companies and subsidiaries that include:

  • We Energies – delivers electricity and natural gas to more than 2.2 million customers in Wisconsin
  • Wisconsin Public Service – delivers electricity and natural gas to more than 776,000 customers in Wisconsin
  • Peoples Gas – delivers natural gas to more than 869,000 customers in the city of Chicago
  • North Shore Gas – delivers natural gas to more than 162,000 customers in Chicago’s northern suburbs
  • Minnesota Energy Resources – delivers natural gas to more than 238,000 customers in Minnesota
  • Michigan Gas Utilities – delivers natural gas to more than 178,000 customers in Michigan
  • Upper Michigan Energy Resources – delivers electricity and natural gas to more than 42,000 customers in Michigan’s Upper Peninsula
  • Bluewater Gas Storage – provides natural gas storage and hub services to 1.4 million natural gas customers of We Energies and Wisconsin Public Service
  • W.E. Power, LLC – designs, builds, and owns modern, efficient power plants that are leased to We Energies
  • WEC Infrastructure LLC – holds ownership interests in wind generating facilities that have long-term offtake agreements for the energy they produce
  • Wispark – develops high-quality, complex real estate projects

Source:  Wisconsin Energy Group – About Us

Having lived in the Midwest U.S. my entire life, I have been a customer of several of WEC’s energy companies.  And I have been an investor in WEC stock since 2017.

Related: Duke Energy dividend analysis

WEC Is A Regulated Utility

Most of the company’s earnings come from Wisconsin and Federal Energy Regulatory Commission regulations.  I cover regulated utilities frequently on Dividends Diversify, so what exactly does it mean?

Well, I was recently reading one of my longtime favorite investment newsletters called Utility Forecaster. It edited by Robert Rapier.

He explained what a regulated utility is.   And he did it in pretty simple terms. 

A Regulated Utility Is…

Here is Mr. Rapier’s explanation…

Most of the U.S. gas and electric utility industries are regulated to some degree.  In regulated markets, these utilities have a monopoly.   The rates they can charge are approved and regulated by state regulatory authorities.

In a regulated market, a regulated utility can own and operate the entire value chain, from generation through transmission to customers.  Regulated utilities have less exposure to market volatility because they can request a rate increase if market conditions dictate the need.

On the other hand, during times of high power demand. Regulated businesses will be at a competitive disadvantage to deregulated businesses that can charge market prices.

For investors, a major appeal of regulated utilities is higher predictability and lower investment risk.

If a regulated utility needs to raise rates to earn an acceptable return, it will make that case to the regulatory authorities for approval.  This is known as a rate case, and regulated utilities go before state regulators to make these cases all the time.

Being a regulated utility helps WEC to be one of the most stable stocks and most consistent stocks to own.

Here you can read my full review of the Utility Forecaster investment newsletter. I will use some of its insights later in the article.

WEC Regulated Business Details

Finally, WEC’s regulated business breaks down in several pieces as indicated in the chart below.

Most of their business is regulated by the states of Wisconsin and Illinois.  Another share is regulated at the national level by the Federal Energy Regulatory Commission known as FERC.

Chart 1: WEC Business By Segment & Jurisdiction

WEC business review

Source:  WEC Investor Book

Now that we know a little bit more about WEC and regulated utilities, let’s look at the WEC stock and its dividend.

Wisconsin Energy Stock Symbol

Wisconsin Energy Group stock trades on the New York Stock Exchange using the ticker symbol WEC (NYSE: WEC).  For ease, I will refer to the company as WEC and to its stock as WEC stock.

Most importantly, when I buy (and hopefully never sell) my dividend stocks. I use the Webull app. It’s fast and powerful. And has great research tools.

And best of all, trades are commission-free. You can learn more about Webull here.

Let’s move right along with our feature company. And next up is, the important dividend information for WEC.

WEC Stock Dividend Rate Per Share

WEC stock pays an annual forward dividend of $2.71 per share.

The annual forward dividend is the last cash dividend payment approved by the company. Multiplied by the number of times a company pays dividends each year.

WEC Dividend Yield

Based on the recent stock price, the dividend payout puts the WEC stock dividend yield at 2.9%.

The yield is a little low for a regulated utility.  But it is near my desired target range between 3-5%.

How Often Does WEC Pay Dividends?

WEC’s dividends are paid frequently. More specifically, 4 times per year.

Each quarterly dividend payment is one-fourth of the annual rate.

When Does WEC Pay Dividends?

WEC dividends are paid in these months: March, June, September, and December. During these months the dividend payments are made on the first day.

When Is The Ex-Dividend Date For WEC Stock?

To receive the next dividend payment from WEC. An investor must complete their purchase before the ex-dividend date.

WEC’s ex-dividend date is approximately 3 weeks in advance of when the quarterly dividends are paid.

The timing of dividend payments varies slightly each quarter. So, it’s a good idea to check the company’s investor relations site. For the most recent dividend announcements.

WEC Dividend History

WEC has paid dividends every quarter since 1942. That’s a good cash dividends history from this company.

And, they have a nice consecutive annual dividend increase streak going. Specifically, they have increased the dividend every year since 2004.

Making WEC, a Dividend Achiever. These companies have increased dividends annually. For at least 10 years.

WEC Dividend Growth Rate

Based on the table below you can see the WEC dividend growth rate is quite attractive. And very consistent.

Table 1: WEC Compound Annual Dividend Growth Rate

1 Year3 Years5 Years7 Years
7.2%6.7%7.7%8.3%
1, 3, 5 and 7 year WEC compound annual dividend growth rate

For 2021, management delivered another 7%+ dividend increase to investors in WEC stock.

Now that we know about the WEC dividend history, let’s look forward.

WEC Dividend Policy & Dividend Growth Forecast

WEC management provides the following dividend growth guidance.

  • Continuing targeting a dividend payout of 65-70 percent of earnings
  • Projecting dividend growth in line with earnings growth

And management expects earnings to grow 5-7% annually for the foreseeable future.  So now our WEC dividend picture becomes clear.  Specifically,

  • Approximately 3% current WEC dividend yield
  • 6% projected WEC dividend growth

Most of all, I really like it when company management provides clear guidance about earnings and dividend growth.  As we know, predictability is one of the advantages of investing in regulated utilities that pay regular dividends.

We will circle back to the dividend in a moment. But now, let’s check out business fundamentals and financial position. To help with that assessment.

WEC Revenue

Revenue grew rapidly in 2015 and 2016.  This was primarily due to the acquisition of Integrys Energy that closed in June 2015.

Chart 2: WEC 7-Year Revenue Trend

WEC stock and dividend review

Otherwise, revenue growth is constrained by the growth of the economies in which the company operates.  This will keep organic revenue growth in the 1-3% range during most years.

While recessions can decrease the demand for energy. And result in revenue declines.

WEC Earnings & Dividend Payout Ratio

WEC has an excellent historical earnings trend. As shown in the chart below.

Chart 3: WEC 7-Year Trend of Earnings & Dividends

WEC dividend payout ratio

Note that 2017 earnings were normalized to take out the one-time accounting benefit from the new corporate tax law.

With that adjustment accounted for, you can see WEC’s earnings trend is exactly what you want from the most consistent and stable stocks.  And, as management targets, the WEC dividend payout ratio is running between 65 and 70%.

WEC Stock Dividend & Cash Flow

WEC energy group does not generate a significant amount of free cash flow. This is typical for utilities because of their high levels of capital expenditures.

However, the capital expenditures are financed by debt. And the debt is serviced by the predictability of ongoing business operations and the cash it generates. This leaves plenty of money to pay dividends to investors.

Since WEC uses debt financing, like other utilities. Let’s take a look at the financial position of the company now.

WEC Credit Rating & Balance Sheet

The company holds public debt across a number of its operating units.  And S&P Global grades WEC credit from BBB+ to A-.  These evaluations represent investment grade – low to moderate credit risk ratings. As shown in the table below.

On a side note, be sure to keep an eye on your personal credit score. I check mine for free using Credit Karma. You can learn more about Credit Karma here.

Furthermore, investing in dividend stocks is just one aspect of solid money management. It’s also a good idea to treat your entire financial picture as a business.

To do so, I manage all of my investments and spending in one place. By using web-based Personal Capital.

You can learn more about Personal Capital here. It’s easy to sign up. And free to use.

Table 2: Credit Rating Evaluation Grid

Credit rating evaluation grid for each major rating agency

Finally, WEC’s debt to equity profile is right in line for a regulated utility running at 1.3 to 1.

So, it appears that the company’s credit rating and balance sheet are very strong. As compared to the utility sector as a whole.

Now, 1 more point about WEC’s dividend…

WEC Dividend Safety

I make a judgment about dividend safety for all of my stocks.

Reviewing the business model and dividend metrics we have discussed so far. As a result, I judge the WEC dividend to be very safe. And I define “safe” as a dividend reduction is unlikely for the foreseeable future.

Furthermore, the investment newsletter Utility Forecaster gives the WEC dividend a safety score of 5 out of a possible 8. This is a good score from Utility Forecaster.

Our WEC stock analysis and dividend review would not be complete with assessing stock valuation. Let’s do that next. Then, wrap up.

WEC Stock Valuation

Let’s judge value in several ways:

  • Dividend discount model
  • Price to earnings ratio
  • Utility Forecaster buy target
  • Morningstar fair value estimate
  • Simply Investing Report

Dividend Discount Model Value for WEC Stock

The single-stage dividend discount model considers several factors I have discussed thus far.

  • Current dividend payment
  • Projected dividend growth

And one more thing, yet to be discussed. My desired annual return on investment of 9%.

Using these assumptions, the dividend discount model puts the value of WEC stock at $96 per share.

WEC Stock Price to Earnings Ratio

The WEC stock price to earnings ratio is running in the mid-20s.

Many of the other regulated utilities that I analyze currently have a lower price to earnings ratios than WEC stock.

So, WEC stock looks overvalued on a price-to-earnings basis.  But a stock with predictable earnings and dividends usually comes at a premium price. Especially during the uncertain times, we have been experiencing.

Morningstar WEC Stock Fair Value

The investment analysis firm Morningstar believes Wisconsin Energy stock is fairly valued at $91 per share.

Utility Forecaster WEC Stock Buy Target

The Utility Forecaster dividend stock newsletter also has a buy target on WEC stock at or below $91 per share.

Simply Investing Report

As of the time of this update, the Simply Investing report considers WEC stock to be overvalued.

As I mentioned earlier, Simply Investing is an excellent resource for dividend stock analysis and recommendations.

I refer to it frequently. You can learn more about Simply Investing by clicking the image below…

Best blue-chip dividend stocks from Simply Investing
Click to learn more about Simply Investing

WEC Stock Valuation Conclusions

We have a range of valuation opinions from these different sources.  There is not a clear consensus.

In my opinion, the shares are fully valued. Meaning they are not significantly overvalued. Nor are the shares a screaming buy.

For my purposes, I’m going to put my personal buy limit at $90 per share. This price equates to a 3% dividend stock yield.

Then, combine that dividend yield with a 6% projected dividend growth rate potential. Then, these facts make WEC one of the most stable and consistent stocks around.

So, a $90 per share WEC stock price target limit makes a good value proposition for me.

WEC Stock & Dividend Analysis Conclusions

WEC has a small position in my dividend growth stock portfolio.  I only wish I owned more.

Since I think it is one of the best dividend stocks in the utility sector. So, I’m willing to add more shares on any price weakness.

WEC can be a very steady stock to add to an investment portfolio.  It has a nice combination of current dividends and moderate but predictable dividend growth.

Further Reading About Slow & Steady Stocks In the Utility Sector

Other Articles About Stable Stocks and Consistent Stocks For Dividend Investing

My Favorite Dividend Investing Resources

The dividend investing and personal finance resources I mentioned in this article are summarized here for your convenience.

I use all of them. To make the most of my money and investments.

Trade stocks for free using the Webull app
Get dividend stock recommendations from Simply Investing
Use Morningstar for insightful investment analysis
Or, try the Motley Fool Stock Advisor
Check your credit for free using Credit Karma
Manage your total financial picture for free using Personal Capital

Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

I currently own WEC stock and collect the WEC stock dividends!

16 thoughts on “Wisconsin Energy Group: WEC Stock Dividend Analysis”

  1. Hi Tom, very good information. Now I know what regulated utility is about. Is the stock price affected by the weather or natural disasters? If the winter is extremely cold, I guess the demand for utility will be high. Big storms could bring quite a lot of damages to the utility infrastructure, and it’s very costly to restore the services quickly. Just a thought.

    • That’s a good point, Helen. As the weather impacts the demand for energy, utility profits can be affected. And profits definitely impact a stock’s price. Tom

  2. Hi Tom,

    Great analysis. I certainly don’t like that it’s overvalued, but I really like utilities as a whole, especially since I’m nervous about a big market downturn in the near future.

    Cheers,
    Miguel

    • Thanks, Miguel. If we get that downturn, everything will likely go down so it would be a good time to pick up some utilities at reduced prices. Tom

  3. WEC is one of my primary holdings (owned since 2009) – and you presented a fair case on the price. Rarely is it on sale, but (and this may be anecdotal) my observation has been a rough correlation to the weather. Mild seasons result in less demand. I continue to accumulate using their DRIP.

    The item I find intriguing (which I didn’t see in your piece is their ~60% ownership of American Transmission Co. (~75% of ATC Holdco). This is similar to FTS’ ITC Holdings. The reason my interest is piqued is that Duke Energy holds 50% of the Holdco JV.

    • Hi SR. Thanks for commenting. I had in the back of my mind when writing the article that this was one of your larger holdings. I appreciate the comments. DRIP is a good way to go with a stock like this that typically carries a premium valuation. It was an up and down winter here in the midwest. But I’m not sure if I can draw any conclusion. Tom

  4. Thanks for sharing. I have seen WEC in several online DGI portfolios. Looks like a good name for those wanting some stable passive income. I currently hold ED, SO and D and have looked into PPL as well to further spread my ute bets. Maybe it’s time to consider WEC too???

    • Hi Keith. Thanks for your comments. Keep it on your watch list for any pullback in price. I own SO and D too. I need to take a closer look at SO and see how they are doing, but I was happy with the recent dividend increase. Tom

  5. Thanks for this analysis! I would love to add another high quality utility stock to my portfolio, but as you wrote, WEC looks a bit overvalued at the moment.

  6. Super comprehensive once again Tom! As you know I’m a big fan of utilities. Not a big fan of my utility bill though, haha.

  7. I imagine at the way it keeps going up the next pull back would put it back at the current range I should have bought some when I first looked at it in the mid 50s

    • I will be keeping an eye on WEC with you Doug. It’s a really small holding for me and would love to add more. Like you, I wish I would have been more aggressive buying at lower prices. Tom

Comments are closed.