Summary
PPL Corporation has a dividend yield over 5% that is much greater than the average yield of the S&P 500 and many other utilities.
Rising interest rates and U.S. tax reform negatively affected PPL Corporation's stock price providing an opportunity for some small investors.
PPL Corporation is in the middle of a ~$15.3B capital expenditure plan resulting in growing long-term debt.
A relatively high payout ratio combined with growing debt limits dividend growth to ~4%-4.5% annually.
The company has upcoming regulatory risk for its U.K. business segment that may lower rates.
PPL Corporation Has A High Yield But Caution Is Warranted
PPL Corporation (PPL) has a yield of ~5.2 – 5.3% that is much greater than the S&P 500’s average yield of ~1.9% and that of many other utilities making it of interest to small investors seeking income. But the company’s debt metrics are worse than some of its peers and furthermore long-term debt will grow substantially during the next five years due to capital expenditures limiting dividend growth. The dividend is only likely to grow at a ~4% rate CAGR over time.
I analyzed this company at the request of several readers that commented on my recent article on National Grid plc ADR (NGG) entitled “National Grid Is A Relatively Little Known Utility With A High Dividend Yield.” In this article on PPL I will examine the effect of rising interest rates and tax reform, PPL’s regulated business structure, recent revenue and earnings, interest rate risk and debt, and dividend growth and safety.
