Two Foreign Utilities with Yields Greater than 6%

CPFL Energia S.A. (CPL) of Brazil and National Grid plc (NGG) of the UK currently have dividend yields over 6%.

CPFL Energia S.A. (CPL earnings growth is about 35% and revenue growth is about 10%. Last year the company had a total revenue of $5.8B) is an electric utility with 6.4 million customers. It has a net margin of 12.60%. The current dividend yield is 7.40%.

Uk-based National Grid (NGG) operates both in the electricity and natural gas businesses. In the UK, it delivers gas to 11 million homes. The US division of National Grid delivers electricity to 5 million customers in Massachusetts, New Hampshire, New York and Rhode Island. Average annual earnings growth have been flat in the last 5 years and the profit margin is about 6%. NGG pays a dividend of 6.87%. On October 15, S&P put a Buy recommendation on National Grid's ADS.

S&P stated:

"We continue to believe that NGG's low-risk regulated revenues and dividend policy make the ADSS attractive for above-average total return. We expect the board to implement an 8% increase in the dividend, which currently yields about 6.4%, and above the average yield of about 5.0% for U.S. peers. We still see EPS of $3.80 for FY 10 (March) and $3.95 for FY 11. Assuming a weighted average cost of capital of 4.9% and terminal growth rate of 2.0%, we keep our 12-month target price of $53, reflecting a premium to U.S.-peers P/E of 13.9X our FY 10 estimate."

With a juicy dividend of over 6% and the possibility of a further increase in dividends, NGG may be an attractive foreign utility stock to own now.

Comments

[Be Rational...:]

Careful with CPL if you are eyeing dividends. They are planning major growth in time to come and haven't ruled out cutting dividends. It's a good stock to be in, but not sure how investors will react when they annouce dividend cuts. Personally, I will let this pass and stick with NGG.

See this Bloomberg article for details:

bloomberg.com/apps...

Nov 05 11:05 PM

[surfgeezer:]

Agree they are expanding and may cut dividends, but I think the currency play with Real/Dollar offsets that. Same reason I do not like NGG as pound is under pressure vs dollar.

On Nov 05 11:05 PM Be Rational You Morons wrote:

> Careful with CPL if you are eyeing dividends. They are planning major
> growth in time to come and haven't ruled out cutting dividends. It's
> a good stock to be in, but not sure how investors will react when
> they annouce dividend cuts. Personally, I will let this pass and
> stick with NGG.
>
> See this Bloomberg article for details:
>
> www.bloomberg.com/apps...

Nov 06 02:01 PM