In March, PPL said it is selling its U.K. business and is buying Narragansett Electric Company, a Rhode Island electric utility. Here's where it gets tricky. Management said that it plans to have a dividend payout ratio of 60% to 65% upon completion of both mergers, with no change prior to the closing of the Narragansett deal. PPL expects a regulatory decision by November, so the acquisition likely won't be completed until sometime in 2022. While I calculate payout ratio using free cash flow because it's more accurate, most of Wall Street bases it on earnings because it's easier. For 2022, analysts are predicting earnings of $1.66 per share. A 65% payout ratio comes out to a $1.08 per share dividend, sharply lower than the current $1.66. The SafetyNet Pro model says the dividend is safe. | SafetyNet Pro is a groundbreaking tool that predicts dividend cuts with stunning accuracy. With it, you can determine the dividend safety rating of nearly 1,000 stocks. Access to SafetyNet Pro is reserved exclusively for subscribers of Marc's newsletter, The Oxford Income Letter. To learn more about SafetyNet Pro and The Oxford Income Letter, click here now. | | |
But SafetyNet Pro is purely a quantitative model. It is unable to take management's comments into account. For the immediate future, the dividend is safe. After the two deals close, it probably won't be. Dividend Safety Rating: A (But again, that is for only the next few quarters. The dividend will likely be cut sometime next year.) If you have a stock whose dividend safety you'd like me to analyze, leave the ticker symbol in the comments section. Good investing, Marc | 
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