Large capitalization utilities are well represented using Standard and Poor's S&P 500 Utility ETF (NYSEARCA:XLU). XLU incorporates all utility companies in the S&P 500 Large-cap Index. Small-cap utilities are represented using PowerShares Small-Cap Utilities ETF (NASDAQ:PSCU), and it incorporates all utilities in the S&P 600 Small Cap Index.
However, there is no ETF that replicates the S&P 400 Mid-Cap Utility Index. About 4.9% of the weighted capitalization of S&P 400 Index is utilities, about the same percentage as both its larger and smaller brethren. There does not appear to be a mutual fund that focuses exclusively on the mid-cap utility sector either. The Bloomberg ticker for the S&P 400 Utility Index is S4UTIL. It seems odd, but that is the way of the world.
The Mid-Cap Utility Index includes the following utility companies: Cleco Corp (NYSE:CNL); Hawaiian Electric (NYSE:HE); OGE Energy (NYSE:OGE); IDACorp (NYSE:IDA); Vectren (NYSE:VVC); Atmos Energy (NYSE:ATO); Alliant Energy (NYSE:LNT); National Fuel Gas (NYSE:NFG); WGL Holdings (NYSE:WGL); PNM Resources (NYSE:PNM); MDU Resources (NYSE:MDU); Black Hills (NYSE:BKH); Aqua America (NYSE:WTR); Questar (NYSE:STR); Westar Energy (NYSE:WR); Great Plains (NYSE:GXP); NV Energy (NYSE:NVE).
Reviewing the financial results of the 17 utility companies of the S&P 400 (type of utility, long-term anticipated eps growth rates, current pe ratio, beta, current yield, 5-year dividend growth rate, trailing 12 month payout ratio, long-term debt to equity ratio, trailing 12 month return on invested capital, 5-year average return on invested capital, and current PEG ratio) and sorted by 5-year ROIC would produce the following:
L-T EPS Growth
5-yr Div Growth
L-T Debt to Equity
National Fuel Gas
Some argue the best method of analyzing long-term financial performance of management is by comparing return on invested capital. ROIC takes into account shareholder returns generated by management from all capital deployed - both equity and debt. Using a five-year timeframe should incorporate various economic backgrounds. Based on these company's financials, the average mid-cap utility has produced a 5-year average ROIC of 4.9%, about the same as the average of larger-cap XLU.
A business recap of the top four firms in ROIC is below, from finance.yahoo.com:
WGL Holdings, Inc., through its subsidiaries, sells and delivers natural gas, and provides energy-related products and services. The company operates in four segments: Regulated Utility, Retail Energy-Marketing, Commercial Energy Systems, and Wholesale Energy Solutions. The Regulated Utility segment sells and delivers natural gas to customers; and operates and owns full and partial interests in underground natural gas storage facilities, including pipeline delivery facilities located in and around Hampshire County, West Virginia. The Retail Energy-Marketing segment sells natural gas and/or electricity directly to residential, commercial, and industrial customers. The Commercial Energy Systems segment provides design-build energy efficient and sustainable solutions to government and commercial clients. This segment also focuses on upgrading the mechanical, electrical, and water and energy-related infrastructure of governmental and commercial facilities by implementing traditional, as well as alternative energy technologies primarily in the District of Columbia, Maryland, and Virginia. The Wholesale Energy Solutions segment engages in acquiring, managing, and optimizing natural gas storage and transportation assets. As of September 30, 2012, the company had approximately 666 miles of transmission mains, 12,803 miles of distribution mains, 13,231 miles of distribution services, and storage capacity for approximately 15.0 million gallons of propane for peak-shaving, as well as served approximately 178,000 natural gas customers and approximately 194,000 electricity customers in Maryland, Virginia, Delaware, Pennsylvania, and the District of Columbia. WGL Holdings, Inc. was founded in 1848 and is headquartered in Washington, the District of Columbia.
WGL Holdings investor relations website.
Cleco Corporation operates as a utility holding company primarily in Louisiana. The company, through its subsidiary, Cleco Power, engages in the generation, transmission, distribution, and sale of electricity to approximately 281,000 customers in Louisiana; and 10 communities in Louisiana and Mississippi. As of December 31, 2011, it had ownership interests in 3 steam electric generating stations, 1 gas turbine, 1 combined cycle unit, and 1 cycle unit with a combined nameplate capacity of 2,524 megawatts, and a combined electric net generating capacity of 2,488 megawatts. Cleco Corporation also owned 72 active transmission substations and 223 active distribution substations. The company, through its subsidiary, Midstream, also owns and operates a combined-cycle natural gas-fired power plant; and owns a natural gas interconnection system. Cleco Corporation was founded in 1934 and is based in Pineville, Louisiana.
Cleco Corp investor relations website.
National Fuel Gas:
National Fuel Gas Company operates as a diversified energy company in the United States. The company's Utility segment sells natural gas or provides natural gas transportation services to approximately 732,600 customers in Buffalo, Niagara Falls, and Jamestown, New York; and Erie and Sharon, Pennsylvania. Its Pipeline and Storage segment provides interstate natural gas transportation and storage services through an integrated gas pipeline system extending from southwestern Pennsylvania to the New York-Canadian border, and eastward to Ellisburg and Leidy, Pennsylvania; and owns and operates 27 underground natural gas storage fields, as well as 4 other underground natural gas storage fields. This segment also transports natural gas for Distribution Corporation, as well as for other utilities, industrial customers, and power producers in New York State. It owns and operates the Empire Pipeline, a 249-mile integrated pipeline system. The company's Exploration and Production segment engages in the exploration, development, and purchase of natural gas and oil reserves in California and the Appalachian region of the United States and in Kansas. As of September 30, 2012, this segment had proved developed and undeveloped reserves of 42,862 thousand barrels of oil and 988,434 million cubic feet of natural gas. Its Energy Marketing segment markets natural gas to industrial, wholesale, commercial, public authority, and residential customers primarily in western and central New York and northwestern Pennsylvania. The company also owns approximately 95,000 acres of timber property and manages an additional 3,000 acres of timber cutting rights; and builds, owns, and operates natural gas processing and pipeline gathering facilities in the Appalachian region. National Fuel Gas Company was founded in 1902 and is based in Williamsville, New York.
National Fuel Gas investor relations website.
OGE Energy Corp., together with its subsidiaries, operates as an energy and energy services provider that offers physical delivery and related services for electricity and natural gas primarily in the south central United States. The company is involved in the generation, transmission, distribution, and sale of electric energy in Oklahoma and western Arkansas; and gathering, processing, transporting, storing, and marketing of natural gas. It furnishes retail electric service in 268 communities and their contiguous rural and suburban areas. OGE Energy Corp. operates coal-fired and natural gas-fired units, as well as wind-powered units. As of December 31, 2011, the company owned and operated 12 generating stations with an aggregate capability of 6,790 megawatts; and a transmission system comprising 51 substations and 4,258 structure miles of lines in Oklahoma, and 7 substations and 279 structure miles of lines in Arkansas. Its distribution system consisted of 353 substations, 27,854 structure miles of overhead lines, 1,895 miles of underground conduit, and 10,120 miles of underground conductors in Oklahoma, as well as 37 substations, 2,250 structure miles of overhead lines, 212 miles of underground conduit, and 572 miles of underground conductors in Arkansas. The company also owned approximately 6,019 miles of intrastate natural gas gathering pipelines in Oklahoma and Texas; approximately 2,250 miles of intrastate natural gas transportation pipelines in Oklahoma; and 2 underground natural gas storage facilities and 8 operating natural gas processing plants in Oklahoma. It serves residential, commercial, industrial, oilfield, public authorities, and street light operators. OGE Energy Corp. was founded in 1995 and is based in Oklahoma City, Oklahoma.
OGE Energy investor relations website.
Utility investors could do much worse than adding these top mid-cap utility firms to their due diligence list.
Author's Note: Please review important disclaimer in author's profile.
Disclosure: I am long NFG, HE. 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.