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 final five companies are: Southern Company, PG&E Corp., American Electric Power Co., Inc., Consolidated Edison, Inc. and SCANA Corp.
Southern Company (SO) Yield 4.54%
The stock closed at $43.16 giving the company a market cap of $37.73 billion. Southern Company operates as an electric utility. The company is based in Atlanta, Georgia and has 4.4 million customers across the southeastern United States. The annual dividend is $1.96 and was increased 3.7% in April 2012 making eleven consecutive years of dividend increases. The last quarterly dividend of $0.49 was paid on December 5, 2012. Earnings for the year just ended are estimated at $2.63 per share with an expected increase to $2.78 this year. Book value is $21.32 per share. The estimated payout ratio this year is 71%. Southern Company is another of our favorite utility companies and should be considered a must for any portfolio looking for utility representation. We look for the company to continue extending its historical record of being shareholder friendly and believe it will once again increase the dividend this year.
PG&E Corp. (PCG) Yield 4.44%
The stock closed at $40.95 giving the company a market cap of $17.53 billion. PG&E operates as a public utility company in northern and central California engaging in the generation and distribution of electricity and the distribution and transmission of natural gas. Dividends were suspended in January 2001 and reinstated in 2005. Since being reinstated the dividend has increased from an annual run rate $1.20 to the current $1.82. The next quarterly dividend of $0.455 will be paid January 15, 2013. Book value is $30.68 per share. Earnings for the year just ended are estimated at $3.19 and estimates for the current year are $2.82 per share. The estimated payout ratio this year is 65%.Although the numbers look fine we have concerns about the regulatory climate in California and thus would place our funds in some of the other companies discussed herein.
American Electric Power Co., Inc. (AEP) Yield 4.35
The stock closed at $43.24 giving the company a market cap of $20.98 billion. American Electric is a public utility holding company that engages in the generation, transmission and distribution of electric power. The company has 5 million customers in eleven states. The annual dividend is $1.88 and the last quarterly dividend of $0.47 was paid on December 9, 2012. Book value is $31.56 per share. Earnings for the year just ended are estimated at $3.04 and are estimated to increase this year to $3.14 per share. The estimated payout ratio this year is 60%. The company reduced the dividend from $2.40 in 2003 but has since increased it in six of the last nine years. We like this company as well as the numbers it is producing currently and feel this one has the potential for the dividend reaching or exceeding the 2003 level in the mid-term. We feel it is likely that the company increases the dividend this year.
Consolidated Edison, Inc. (ED) Yield 4.33%
The stock closed at $55.91 giving the company a market cap of $16.37 billion. Consolidated Edison provides electric and natural gas services to customers in the United States, primarily New York. The annual dividend is $2.42 per share and the last quarterly dividend of $0.605 was paid on December 14, 2012. Book value is $40.43 per share. Earnings are estimated at $3.77 for the year just ended and are slated to increase to $3.84 this year. The estimated payout ratio this year is 63%. Consolidated Edison has increased dividends for 38 consecutive years. It is difficult to take issue with any company with the dividend history that this one has, and, we are confident that they will do every thing in their power to keep their record intact; however, we have increasing concerns about the political and regulatory climate in New York.
SCANA Corp. (SCG) Yield 4.26%
The stock closed at $46.49 giving the company a market cap of $6.13 billion. SCANA engages in the generation, transmission, distribution and sale of electricity and transports and sells natural gas to customers in South Carolina. The annual dividend is $1.98 and the last quarterly dividend of $0.495 was paid on December 31, 2012. Book value is $31.14 per share. Earnings per share are estimated at $3.16 for the year just ended and are estimated to increase to $3.25 per share this year. The estimated payout ratio this year is 61%. Dividends have increased the last seven years. We have always found SCANA to be a conservative well run company and feel the dividend has room to grow and that the company will increase it once again this year. A cautionary note on this company is that there is probably some additional risk inherent in the company now as they embark upon construction of their new nuclear plant.
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.