4 Stocks With Sluggish Dividend-Growth Potential

Many of the utilities we cover have strong growth prospects and healthy financials that should allow them to easily grow their dividends. For a few utilities, however, dividend growth may be more challenging.

Hawaiian Electric's shareholders were treated to a rare dividend increase of 3.2% in the first quarter of 2019--the first in 20 years--and a similar increase in 2020. Once past the impact from COVID-19, which likely will result in no increase in 2021, we project average annual increases of roughly 3% for 2022 through 2024. Hawaiian Electric continues to be a confusing story for investors, as it derives roughly two thirds of consolidated earnings from an electric utility and about one third from Hawaii-based American Savings Bank. The Hawaiian economy, driven in large part by tourism, affects both businesses. And that reliance on tourism will weigh on Hawaiian's dividend growth.

Consolidated Edison has increased its dividend for 46 consecutive years and raised it 3.4% in January 2020. Indeed, Consolidated Edison's focus on electric and natural gas distribution, combined with decoupled and forward-looking rates, has produced among the most stable earnings in the utilities sector. We believe the dividend is safe considering the conservative strategy of the company's nonutility businesses and the favorable regulatory framework for its New York utilities. However, we estimate the economic impact of COVID-19 will reduce average annual dividend increases to about 2.4% over the next five years.

PPL plans to spend $13.8 billion at its domestic and international utilities through 2024. These regulated growth opportunities support 4% annual rate-base growth through 2024, one of the lowest growth rates in the sector. Beginning in 2023, we think it will be difficult for PPL to offset an expected decline in returns in the United Kingdom under the proposed regulatory framework. As a result, we forecast dividends will increase less than 1% annually through 2022.

Lastly, PG&E suspended its common dividend in late 2017, and the company likely won't bring it back until at least 2023 based on regulatory requirements in the bankruptcy exit plan. We expect it will take PG&E at least three years post-bankruptcy to accumulate the $6.2 billion of earnings that regulators are requiring before it can initiate a dividend.

Andrew Bischof, Travis Miller, and Charles Fishman provided the analysis for this report.