Utility company stocks have long been the province of "widows and orphans" and retirees due to their safety, stability and high yields. Now with interest rates being depressed across the entire maturity spectrum, utility stocks (and dividend stocks in general) are becoming of greater interest to an ever broader group of investors.
Today we will examine the fifteen highest yielding utility stocks that are represented in the Standard & Poor's 500 Stock Index. The second five companies are: Ameren Corporation, Integrys Energy Group, Inc., PPL Corporation, Public Service Enterprise Group, Inc. and Duke Energy Corporation.
Ameren Corporation (NYSE:AEE) 5.09% Yield
The stock closed at $31.46 giving the company a market cap of $7.63 billion. Ameren operates as a public utility holding company in Missouri and Illinois providing both electricity and natural gas. Earnings are estimated at $2.44 per share for the year just ended and $2.05 this year. Book value is $32.46 per share. The annual dividend is $1.60 per share and the last quarterly dividend of $0.40 was paid on December 30, 2012. Investors should remember that the dividend was reduced from $2.54 per share back in 2009. The estimated payout ratio this year is 78%. A big yellow flag for us is our perception of both the regulatory and fiscal situation in Illinois. We find both to be bothersome. Likewise, with the high payout ratio we see little dividend upside.
Integrys Energy Group, Inc. (NYSE:TEG) 5.05% Yield
The stock closed at $53.92 giving the company a market cap of $4.20 billion. Integrys primarily operates as a regulated electric and natural gas utility company in both the United States and in Canada. Book value is $2.72. The dividend is $2.72 per share per year and the last quarterly dividend of $0.68 was paid December 20, 2012. The dividend is well supported by earnings per share that are estimated to be $3.23 in the year just ended and $3.43 this year. The estimated payout ratio this year is 79%. Additionally, the company has increased the dividend in ten of the last eleven years. This company is historically very shareholder friendly and we feel they will always safeguard the dividend, however despite their great record we do not see a dividend increase this year.
PPL Corporation (NYSE:PPL) 4.97% Yield
The stock closed at $28.95 giving the company a market cap of $16.84 billion. PPL is an energy and utility holding company that engages in the generation, transmission, distribution and sale of electricity in the United States and the United Kingdom. Earnings are estimated at $2.35 per share for the year just ended and should grow to $2.43 per share this year. The annual dividend is $1.44 per share and the last quarterly dividend of $0.36 was paid on January 2, 2013. Book value is $19.30 per share. The dividend has been increased three of the last five years. The estimated payout ratio this year is 59%.We like this company a lot and feel additional dividend increases are certain to come both this year and in the future.
Public Service Enterprise Group, Inc. (NYSE:PEG) 4.71% Yield
The stock closed at $30.12 giving the company a market cap of $15.24 billion. Public Service operates as an electrical and natural gas utility company primarily in the northeastern and mid Atlantic states. Earnings per share are estimated at $2.39 in the year just ended and $2.33 per share this year. Book value is $21.36 per share. The annual dividend is $1.42 and the last quarterly dividend of $0.355 was paid December 31, 2012. The estimated payout ratio this year is 61%. The dividend has been increased seven of the last ten years. With a low payout ratio and a favorable dividend history we feel further dividend increases are on the horizon.
Duke Energy Corporation (NYSE:DUK) 4.66% Yield
The stock closed at $65.69 giving the company a market cap of $46.26 billion. Duke is an electric and natural gas utility operating in North Carolina, South Carolina, Ohio, Indiana and Kentucky. The company is based in Charlotte, North Carolina. Earnings are estimated to be $4.27 per share in the year just ended and are slated to increase to $4.39 per share this year. Book value is $58.10 per share. The annual dividend is $3.06 per share and the next quarterly dividend of $0.765 will be paid on March 16, 2013. The estimated payout ratio this year is 70%. The dividend has been increased in each of the last five years. We view Duke as shareholder friendly and feel this company should be represented in every portfolio that has a need for yield. The safety of the dividend is beyond question and we believe this year will see a further increase.
NOTE: we calculate our payout ratios using the indicated dividend and the earnings estimate for the current year rather than the more common backward looking calculation.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.