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

To create the stock list below we began with a universe of utilities offering 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.

Finally, we looked for stocks with strong sales trends. We screened for names seeing faster growth in revenue than accounts receivable year-over-year, as well as accounts receivable comprising a smaller portion of current assets over the same time period.

Since accounts receivable is the portion of revenue not yet received, and there is no guarantee the money will ever be received, the smaller the portion of revenue made up of receivables, the healthier the company's revenue.

Our analysis of the financials left us 3 stocks.

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

The List

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

1. American States Water Company (NYSE:AWR): Provides water, electric, and contracted services in the United States.

  • Market cap at $1.07B, most recent closing price at $55.84.
  • Dividend yield at 2.54%.
  • MRQ net profit margin at 9.15% vs. 6.98% y/y. MRQ sales/assets at 0.088 vs. 0.078 y/y. MRQ assets/equity at 2.818 vs. 3.03 y/y.
  • Revenue grew by 17.03% during the most recent quarter ($112.43M vs. $96.07M y/y). Accounts receivable grew by -6.07% during the same time period ($56.01M vs. $59.63M y/y). Receivables, as a percentage of current assets, decreased from 36.01% to 30.44% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • AWR has recorded great gains over the last month, when compared to its closest competitors. The stock returned 6.30% since 2/19/13, better than Aqua America Inc. (NYSE:WTR) and American Water Works Company, Inc. (NYSE:AWK), which returned 6.02% and 2.36% during the same holding period.

2. Chesapeake Utilities Corporation (NYSE:CPK): Operates as a diversified utility company that primarily engages in regulated energy and unregulated energy businesses.

  • Market cap at $477.79M, most recent closing price at $49.77.
  • Dividend yield at 2.93%.
  • MRQ net profit margin at 9.% vs. 7.65% y/y. MRQ sales/assets at 0.149 vs. 0.147 y/y. MRQ assets/equity at 2.86 vs. 2.945 y/y.
  • Revenue grew by 5.32% during the most recent quarter ($109.52M vs. $103.99M y/y). Accounts receivable grew by -30.04% during the same time period ($58.49M vs. $83.6M y/y). Receivables, as a percentage of current assets, decreased from 65.44% to 58.14% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • CPK has performed poorly since 2/19/13, especially when compared to industry competitors. The stock returned 4.47% over the last month, much lower than EQT Corporation (NYSE:EQT) and Sempra Energy (NYSE:SRE), which returned 10.67% and 4.50% during the same time period. Only TransCanada Corp. (NYSE:TRP) performed worse, returning 4.23%.

3. Pinnacle West Capital Corporation (NYSE:PNW): Provides retail and wholesale electric services primarily in the State of Arizona.

  • Market cap at $6.27B, most recent closing price at $57.09.
  • Dividend yield at 3.82%.
  • MRQ net profit margin at 3.26% vs. 1.88% y/y. MRQ sales/assets at 0.052 vs. 0.051 y/y. MRQ assets/equity at 3.368 vs. 3.431 y/y.
  • Revenue grew by 3.78% during the most recent quarter ($693.12M vs. $667.89M y/y). Accounts receivable grew by -3.69% during the same time period ($276.31M vs. $286.9M y/y). Receivables, as a percentage of current assets, decreased from 30.% to 27.47% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • PNW has performed in line with the rest of its industry since 2/19/13, returning 3.84% over the last month. This performance has been better than Southern Company (NYSE:SO) and Duke Energy Corporation (NYSE:DUK), but worse than industry leaders like NextEra Energy, Inc. (NYSE:NEE) and Dominion Resources, Inc. (NYSE:D), which returned 4.80% and 3.94% respectively.

*Profitability data sourced from Fidelity, short data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 3 Dividend Utility Stocks With Strong Sources Of Profitability And Encouraging Sales Trends