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High Yield Utility Stocks (Electric Sector)
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Feb 122012
 

A strong dividend play is investing in high yield utility stocks.  Most investors are aware of this strategy, much more than the investments in Business Development Companies or Real Estate Investment Trusts, which I have written articles on here in the past.  Utility stocks are usually considered safe dividend stocks, due to the constant demand for their services (electricity, water, gas, etc).  This article is going to focus on high yield utility stocks in the electric sector.  I am going to even focus even deeper and talk about electric companies with generation and distribution pieces.

Q3 (Sep ’11) Q4 (Dec ’11)

2011

EXC -Exelon
Net profit margin

14.26%

13.01%

Operating margin

24.98%

23.35%

EBITD margin

30.31%

Return on average assets

4.45%

4.65%

Return on average equity

16.91%

17.86%

Employees

19,214

P/E Ratio

10.67

Dividend Yield %

5.24%

DUK – Duke Corporation
Net profit margin

11.83%

9.25%

Operating margin

19.35%

16.17%

EBITD margin

28.69%

Return on average assets

3.12%

2.27%

Return on average equity

8.33%

5.95%

Employees

18,440

P/E Ratio

15.52

Dividend Yield %

4.66%

SO – Southern Company
Net profit margin

7.49%

12.84%

Operating margin

15.94%

23.96%

EBITD margin

33.69%

Return on average assets
Return on average equity
Employees

25,940

P/E Ratio

17.26

Dividend Yield %

4.23%

D – Dominion Resources
Net profit margin

10.41%

19.61%

Operating margin

21.90%

37.51%

EBITD margin

44.45%

Return on average assets

3.63%

6.98%

Return on average equity

13.49%

25.56%

Employees

15,800

P/E Ratio

19.03

Dividend Yield %

4.26%

TE – Teco Energy
Net profit margin

7.10%

8.16%

Operating margin

17.37%

18.59%

EBITD margin

28.30%

Return on average assets

2.92%

3.74%

Return on average equity

9.42%

12.29%

Employees

4,233

P/E Ratio

14.12

Dividend Yield %

4.94%

PPL – PPL Corporation
Net profit margin

14.39%

 9.60%

11.44%

Operating margin

25.13%

 20.37%

23.71%

EBITD margin

33.42%

Return on average assets

4.42%

 3.89%

3.86%

Return on average equity

16.49%

 14.88%

15.17%

Employees

13,809

P/E Ratio

10.85

Dividend Yield %

5.05%

PGN – Progress Energy
Net profit margin

10.67%

8.51%

Operating margin

25.12%

20.16%

EBITD margin

29.19%

Return on average assets

3.52%

2.70%

Return on average equity

11.58%

8.83%

Employees

11,000

P/E Ratio

20.61

Dividend Yield %

4.55%

FE – First Energy Corp
Net profit margin

10.79%

5.70%

Operating margin

21.66%

13.53%

EBITD margin

19.12%

Return on average assets

4.33%

2.20%

Return on average equity

15.74%

9.17%

Employees

13,330

P/E Ratio

17.75

Dividend Yield %

5.16%

 

Exelon – EXC is the largest power producer in the United States.  Not sure if its merger issues or what, that has the stock stale at about 40 dollars a share.  EXC has extremely positive numbers with over a 5% dividend yield and a PE ratio of just over 10.  The other numbers above show a positive trend and larger profit margins than most over utilities listed.

Duke Energy – DUK is approaching a price high they haven’t seen since late in 2006.  The stock is approaching 22 dollars a share.  DUK has a very strong dividend yield of 4.66% and a PE of 15.52.  DUK is also showing positive growth in net profit margin and operating margin, but not the same margins that Exelon is showing.

Southern Company – SO has just came off of an all-time high and their stock is sitting just below 45 dollars a share.  SO continues to show strong net profit and operating margins as well as increasing dividend payouts.  SO yields 4.23% with a PE of just over 17.

Dominion Resources – D just like Southern Company is coming off of an all-time high, and their stock is sitting just below 50 dollars a share.  D has shown some of the strongest margins over the past couple of years, but their margins have slipped the past couple quarters.  D yields the same as SO, with a 4.23% yield and a slightly higher PE of just over 19.

TECO Energy – TE, is the smallest company I have listed here.  I have included TE here due to their high dividend yield, 4.99% and their PE of 14.  But buyer beware as they just missed earnings for the 4th quarter, with lower revenues.  However, they did increase the dividend once again, so keep an eye on TECO.

PPL Corporation – PPL beat 4th quarter earnings estimates by 8 cents a share.  PPL like TECO decided to raise their dividend 1 cent per quarter to 36 cents a quarter.  PPL has a 5.06% yield and a PE of 10.85.

Progress Energy – PGN sits in the same mold as DUK, SO, and D with its stock at an all-time high.  PGN has a 4.54% yield and a PE of over 20.

First Energy – FE has been a stock laying around 40-42 dollars a share for quite some time.  FE has a PE of just under 18, and a yield of 5.16%.

I could have written pages on each of these companies and reasons of why and why not to buy these stocks.  I want to make this as simple as I could for everyone reading this.

Avoid SO, D, PGN, and DUK.  All these stocks are at or near all-time highs.  There are better stocks in this sector for growth.  Double avoid SO and D as their profit and operating margins have fallen quite a bit.

Watch and wait on TETE has fallen from over 19 at the start of the year into the mid 17’s.  As mentioned, their earnings report was well short this quarter, but I believe this is a stock to buy if it falls to 16 a share.

These are the stocks to buy from this article, EXC, PPL and FE.  Why these three?  All three have dividend yields over 5%.  All three stocks are well below their all-time highs and they have room to grow.  EXC and PPL show PE ratios that are under 11.  FE has shown increases in profit and operating margins.  These are the high yield utility stocks you should look to invest your money in.

Full disclosure: I own PPL, and DUK.  After research/writing this article, I am planning to sell DUK, and placing an order on EXC.  I will also place a limit order in for TE at 15.90 a share.  I also work for PPL, and I am long in my position with PPL.  I have not given any inside information on PPL in this article and all information in this article for PPL is readily available on their quarterly and annual reports available on their internet website.

Originally posted February 12, 2012

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  • wp socializer sprite mask 32px High Yield Utility Stocks (Electric Sector)
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