Dividend Growth Stock Overview: Vectren Corporation

Vectren serves over 1 million natural gas and electricity customers in Indiana and Ohio.
Photo courtesy Ilya/flickr.com.

About Vectren Corporation

Vectren Corporation is an energy holding company that, through its subsidiaries, serves over 1.1 million customers in Indiana and Ohio. Vectren has its headquarters in Evansville, Indiana. The company was formed through the merger of Indiana Gas Company and Southern Indiana Gas and Electric Company in 2000. In late 2000, Vectren expanded to western Ohio by purchasing the natural gas distribution assets of Dayton Power and Light, which renamed it Vectren Energy Delivery of Ohio (VEDO). In 2006, Vectren acquired Duke Energy’s interest in Miller Pipeline, which became Vectren’s Infrastructure Services group.

Vectren Corporation uses a pass-through subsidiary (Vectren Utility Holdings) to manage three operating utility companies: Vectren Energy Delivery of Indiana – North (Vectren North, formerly Indiana Gas), Vectren Energy Delivery of Indiana – South (Vectren South, formerly Southern Indiana Gas and Electric) and VEDO. Vectren North serves 570,000 natural gas customers in central and southern Indiana, Vectren South serves 142,000 electric energy customers and 111,000 natural gas customers in southwestern Indiana, and VEDO serves 314,000 natural gas customers in west central Ohio. Vectren South also owns 1300 MW of electrical generation capacity, most of which is coal-fired.

Vectren also has a non-utility group, which includes the Infrastructure Services and Energy Services groups. The Infrastructure Services group is responsible for the construction, repair and replacement of natural gas pipelines, while the Energy Services group is responsible for contracting services and renewable energy projects.

In the year ending December 31, 2014, Vectren earned $188.0 million, up 8.0% from 2013’s earnings of $174.1 million. Earnings per share were $2.28, up 7.5% from the $2.12 earned per share in 2013. The bulk of the earnings came from the Utility Group, which provided 79% of total earnings and EPS. The company is expecting an increase from 2014 to 2015 of between 5 – 11% in EPS, to a total 2015 EPS of between $2.40 and $2.55 per share.

Like many utilities, Vectren has a large amount of debt – at the end of 2014, the company had a total of $1.58 billion in long-term debt and a long-term debt to equity ratio of 0.98. However, as a regulated utility Vectren’s rates reflect its debt service requirement.

The company is a member of the S&P Mid Cap 400 index and S&P’s High Yield Dividend Aristocrats index, and trades under the ticker symbol VVC.

Vectren Corporation’s Dividend and Stock Split History

Vectren Dividend Growth

Vectren Corporation has increased its dividend less than 3% per year since 2009.

Vectren Corporation and its predecessor companies have increased dividends since 1960. Since 2011, Vectren has announced dividend increases at the beginning of November with the stock going ex-dividend later in the month. In November 2014, Vectren increased its quarterly dividend by 5.6%, to an annualized rate of $1.52. I expect Vectren to announce its next dividend increase in November 2015.

Vectren has increased its dividend very slowly. Over the last 2 decades, the company has increased the dividend by less than 5% per year and by much less in most years. Vectren’s 5-year compounded annual dividend growth rate (CADGR) is 1.65%, its 10-year CADGR is 2.42% and its 20-year CADGR is 3.18%. Over 25 years, Vectren’s CADGR is 3.49%.

Vectren has split its stock 3 times in the last 25 years: a 2-for-1 split in February 1989, a 3-for-2 split in October 1993, and a 4-for 3 split in October 1998. For each share of stock you owned at the beginning of 1989, you would now have 4 shares.

Over the 5 years ending on December 31, 2014, Vectren Corporation stock appreciated at an annualized rate of 18.79%, from a split-adjusted $19.38 to $45.85. This significantly outperformed both the 13.0% annualized return of the S&P 500 and the 14.9% annualized return of the S&P Mid Cap 400 index during this time.

Vectren’s Direct Purchase and Dividend Reinvestment Plans

Vectren Corporation has both direct purchase and dividend reinvestment plans. The plans have very favorable terms for investors, with Vectren paying nearly all of the fees associated with opening and purchasing shares. As a new investor, you’ll pay a $10 fee to open a new account. After that, there are no fees to buy shares either directly or by reinvesting dividends. The minimum purchase for a new investor is $500.

When you go to sell your shares in the plan, you’ll pay a service fee of $15 and a brokerage commission of 12 cents per share sold.

Helpful Links

Vectren Corporation’s Investor Relations Website

Current quote and financial summary for Vectren Corporation (finviz.com)

Information on the direct purchase and dividend reinvestment plans for VVC

Want to find out about more great dividend growth stocks?

Check out the list of current S&P Dividend Aristocrats.

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