Dividend Policy at Fpl Group
Dividend Policy at FPL Group
FPL Group Overview:
The FPL Group was Florida’s largest electric utility group and the fourth largest in America. The FPL Group had annual revenues of exceeding $5 billion. Florida Power & Light Company, the main subsidiary of the FPL Group had 3.9 million customer accounts and covered a service area that included six of America’s ten fastest growing metropolitan areas.
a. Summarize the key elements of FPL’s financial policy and compare it with other relevant firms.
We are commenting on FPL’s financial policy from a dividend and capital structure perspective.
FPL has a very high dividend payout ratio of around 90% and has a 47 year streak of dividend increases. FPL’s dividend payout ratio is also high from a relative comparison as the average payout ratio among power utilities in America is around 80%. When compared with the payout ratio of power utilities in the southeast of America, this seems even higher as the average for utilities operating in the same geography as FPL operates in is around 77%. Utility | Dividend payout | FPL Group | 91% | Carolina Power | 74% | Duke Power | 68% | Florida Progress | 87% | SCANA Corporation | 74% | The Southern Co. | 75% | TECO Energy | 73% | Average | 77% |
As regards the capital structure, FPL operates with a Debt to total assets ratio of 46.4% which is consistent with other utilities in the same geography.
b. What are the issues the FPL must consider in choosing how much cash to distribute to investors?
The power landscape is in a situation where significant regulatory changes are expected. The power sector is poised towards rapid deregulation, resulting in the possibility of increased competition in the near future. The immediate anticipated threat comes from retail wheeling which would allow the deregulation of the power distribution business.
Though the possibility of retail wheeling in Florida in the immediate term is low considering the fact
FPL Group Overview:
The FPL Group was Florida’s largest electric utility group and the fourth largest in America. The FPL Group had annual revenues of exceeding $5 billion. Florida Power & Light Company, the main subsidiary of the FPL Group had 3.9 million customer accounts and covered a service area that included six of America’s ten fastest growing metropolitan areas.
a. Summarize the key elements of FPL’s financial policy and compare it with other relevant firms.
We are commenting on FPL’s financial policy from a dividend and capital structure perspective.
FPL has a very high dividend payout ratio of around 90% and has a 47 year streak of dividend increases. FPL’s dividend payout ratio is also high from a relative comparison as the average payout ratio among power utilities in America is around 80%. When compared with the payout ratio of power utilities in the southeast of America, this seems even higher as the average for utilities operating in the same geography as FPL operates in is around 77%. Utility | Dividend payout | FPL Group | 91% | Carolina Power | 74% | Duke Power | 68% | Florida Progress | 87% | SCANA Corporation | 74% | The Southern Co. | 75% | TECO Energy | 73% | Average | 77% |
As regards the capital structure, FPL operates with a Debt to total assets ratio of 46.4% which is consistent with other utilities in the same geography.
b. What are the issues the FPL must consider in choosing how much cash to distribute to investors?
The power landscape is in a situation where significant regulatory changes are expected. The power sector is poised towards rapid deregulation, resulting in the possibility of increased competition in the near future. The immediate anticipated threat comes from retail wheeling which would allow the deregulation of the power distribution business.
Though the possibility of retail wheeling in Florida in the immediate term is low considering the fact