Utilities are a favorite among investors during good times and volatile market conditions. Many utility stocks tend to be relatively stable long-term value plays as they pay decent dividends. For the most part, utilities have a solid business model and enjoy monopoly in the territory they operate due to state regulations. While prices they charge are also highly regulated they usually get approvals for rate increases. So far this year, the utility components in the S&P 500 Index is down 17.33% while the S&P is off 16.54% as of market close yesterday.
The following is a brief overview of the top 5 US utilities based on market cap today:
1. Exelon Corp (EXC) is one of the largest utility companies in the US with customers in Northern Illinois, Chicago, Southeastern Pennsylvania including Philadelphia. With a market of $29B, the stock has an yield of 4.86% and a P/E of 1.73. Average annual earnings growth over the past 5 years is about 25%.
2.As the name implies, Southern Co(SO) supplies electricity to customers in the states of Alabama, Georgia, Florida, and Mississippi. Currently Southern pays a 7.95% dividend. In the last 52 weeks, So is down 18%. The 5 year annual earnings growth is a low 2.10%.
3.Florida-based FPL Group Inc (FPL) is “engaged primarily in the generation, transmission, distribution and sale of electric energy”. Compared to Southern Co, earnings have grown at 100% annually in the last 5 years. Dividend growth rate in the same period is 8%. The dividend yield is 4.05%.
4. Dominion Resources Inc (D) is a producer and distributor of both electricity and natural gas. Last year Dominion had $16B in revenue. With a dividend rate of 5.79% and a P/E of just 9.5, Dominion is attractive at current levels. Dominion’s annual dividend growth rate is 4.10%.
5. Charlotte,NC-based Duke Energy(DUK) operates in the mid-western states. Duke bought a Cincinnati,Ohio utility called Cinergy a few years ago. The gains promised by Duke as a result of this merger did not materialize. The current yield of DUK is 6.99%. Duke’s profit margin is about 10%.
Disclosure: Long FPL, DUK
