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Are you looking to invest capital in a conservative sector such as utilities, and collect some dividend income? If yes, we researched companies that might interest you.

We started by looking for stocks in the utilities sector with a dividend of at least 1%, but not more than 5%. This allowed us to focus on companies with a strong credit profile.

We further analyzed our list of companies for strong profitability by performing DuPont analysis. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components. If the ROE is unsatisfactory, the DuPont analysis helps target the part of the business that is underperforming. Learn more about the equation here.

Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.

In order to take advantage of the volatility around earnings season, we focused on stocks that either announced earnings in February or are expected to report this month.

Our final list consisted of 3 stocks.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

A Closer Look

We looked at AGL Resources Inc. (GAS) in more detail. The stock trades around $40.28 versus its 52-week range of $40.21-$40.58, flat from last year. AGL Resources trades with a P/E multiple of 14.5 times, and pays a dividend of 4.7%. The company's competitor Atmos Energy Corp. (ATO) trades with a P/E multiple of 15 times, and pays a dividend of 3.7%.

As of December 31st, 2013, AGL Resources has $125 million in cash and cash equivalents, and long-term debt of $1.95 billion. The shortest maturity is in the form of a $500 million senior note due 2014.

On December 7th, 2012, the company amended the terms of its former $750 million unsecured credit facility to increase the borrowing capacity to $950 million, with an accordion feature, which would further increase the borrowing capacity to $1.2 billion. As of December 31st, 2013, the company has $571 million outstanding under the credit facility. Given the liquidity available to the company in the form of a credit facility, and cash, leverage does not seem to be a near-term risk.

Does a strong credit profile mean this dividend rich stock is an attractive investment opportunity?

The List

Do you think these dividend stocks are attractive? Use this as a starting point for your own analysis.

1. American Water Works Company, Inc. (AWK): Provides water and wastewater services to residential, commercial, industrial, public, and other customers in the United States and Canada.

  • Market cap at $6.93B, most recent closing price at $39.18.
  • MRQ net profit margin at 18.49% vs. 18.06% y/y. MRQ sales/assets at 0.057 vs. 0.052 y/y. MRQ assets/equity at 3.281 vs. 3.41 y/y.
  • Dividend yield at 2.55%.
  • The company is expected to report earnings on February 26th, 2013.

2. AGL Resources Inc.: Engages in natural gas distribution business in the United States.

  • Market cap at $1.84B, most recent closing price at $40.35.
  • MRQ net profit margin at 8.05% vs. 4.18% y/y. MRQ sales/assets at 0.086 vs. 0.057 y/y. MRQ assets/equity at 4.143 vs. 4.193 y/y.
  • Dividend yield at 4.66%.
  • The company reported earnings on February 6th, 2013.

3. Aqua America Inc. (WTR): Operates regulated utilities that provide water or wastewater services in the United States.

  • Market cap at $4B, most recent closing price at $28.58.
  • MRQ net profit margin at 23.61% vs. 21.52% y/y. MRQ sales/assets at 0.048 vs. 0.045 y/y. MRQ assets/equity at 3.414 vs. 3.488 y/y.
  • Dividend yield at 2.45%.
  • The company is expected to report earnings on February 25th, 2013.

*Profitability data sourced from Finviz, all other data sourced from Finviz.

Source: 3 Dividend Utility Stocks With Strong Sources Of Profitability