The Dividend Champions spreadsheet and PDF have been updated through 2/28/11 and are available here. Note that all references to Champions mean companies that have paid higher dividends for at least 25 straight years; Contenders have streaks of 10-24 years; Challengers have streaks of 5-9 years. Together, all of these companies may be referred to using the abbreviation “CCC.”
This is the third in a series of articles focusing on specific industries and isolating the CCC companies within those industries. The first covered Master Limited Partnerships (or MLPs) and the second covered Real Estate Investment Trusts (or REITs).
What Are Utilities?
Although that question may seem a bit facetious, it's worth asking in view of recent changes, such as the deregulation trend of the 1990s, as well as the diversification into other fields of operation that many traditional utility companies are following. In addition, we have to understand that some industries evolve over time to resemble the widely held image of the utility industry.
We first think of the local electric company or the firm that provides us with water (and sometimes wastewater treatment). Providers of these necessities may also extend to companies that distribute natural gas or other services. So the basic definition includes companies that provide necessary services and are usually regulated by federal, state, and sometimes local governments. These are the traditional “widows and orphans” stocks that are expected to provide a steady, dependable stream of dividend income, largely because of the perception that they are monopolies protected by state governments.
Deregulation may have changed the image of utilities, as protected monopolies to some extent and losses caused by ill-conceived attempts at diversification may have provided a hard lesson in dividend vulnerability. But many of the traditional utilities have managed to continue to extend long histories of dividend increases, and those appear in the table below.
I've expanded the listing to include what might be called “pseudo-utilities,” including telecommunications providers and waste management companies. Some sources exclude the telecom companies, but I think they fit the description well enough to be included. Maybe telephone service was considered a luxury 100 years ago, but it's something few of us would do without today. And because many residential, commercial, and industrial clients have no municipal trash disposal, they are forced by necessity to pay for waste removal, so I'm included those companies as well.
The Companies
Utilities (and pseudo-utilities) make up one of the largest segments of the CCC universe, with 58 traditional utilities, 11 telecom companies, and three waste management firms. These 74 companies have an average yield of 3.86%, well ahead of the 2.91% average for the 447-company CCC list. The electric and telecom companies lead the way, with average yields of over 4%. The trade-off is a slightly lower rate of dividend growth in general, although there is a wide range of DGRs to consider.
For an investor looking to add one or more utilities to his or her portfolio, the table below should provide plenty of good choices. In considering these companies, it's a good idea to think about the role of any non-regulated activities that a company conducts. For example, some of the natural gas distributors also have operations that explore for and produce oil and gas. Others are attempting to develop wind and solar energy that may be sold to other utilities.
So this article should only be considered a starting point for further research, and that is really the focus of this series, isolating industries for potential investors. I'm including as many columns of data as is practical, from a perspective of width and significance.
No. 2/28 % Payout TTM NY% MktCap DGR DGR Company Symbol Industry Yrs Price Yield Inc. %Ratio P/E Growth ($Mil) 5-yr 10-yr Black Hills Corp. Electric 41 30.82 4.74 1.4 83.4 17.6 16.9 1,210 2.4 2.9 Consolidated Edison Electric 37 49.98 4.80 0.8 69.2 14.4 4.2 14,590 0.9 0.9 Edison International Electric 8 37.12 3.45 1.6 32.2 9.4 (14.3) 12,090 4.7 1.3 Empresa Nacional Electric 7 52.19 2.95 45.6 37.4 12.7 10.0 14,230 48.2 52.2 ITC Holdings Corp. Electric 6 68.55 1.95 4.7 47.2 24.1 22.5 3,480 20.1 n/a Portland General Elec. Electric 5 23.42 4.44 2.0 72.7 16.4 7.0 1,760 n/a n/a PPL Corp. Electric 9 25.43 5.51 1.4 64.5 11.7 (9.7) 12,290 7.8 10.2 Southern Company Electric 9 38.11 4.78 4.0 76.8 16.1 7.1 32,160 4.1 3.0 TransAlta Corp. Electric 5 21.16 5.28 8.1 100.7 19.1 15.7 4,660 5.0 n/a Westar Energy Electric 7 26.00 4.92 3.2 68.4 13.9 14.7 2,900 6.2 (1.4) Averages for 10 Electric 13.4 37.28 4.28 7.3 65.3 15.5 7.4 9,937 11.0 9.9 Alliant Energy Corp. Elec/Gas 8 39.38 4.32 7.6 65.1 15.1 5.9 4,370 8.5 (2.3) Avista Corp. Elec/Gas 9 22.32 4.93 10.0 66.7 13.5 6.3 1,270 12.9 7.6 CenterPoint Energy Elec/Gas 6 15.86 4.98 1.3 75.2 15.1 10.3 6,710 21.1 (6.3) Dominion Resources Elec/Gas 8 45.63 4.32 7.7 41.4 9.6 2.9 26,560 6.4 3.6 DPL Inc. Elec/Gas 6 26.02 5.11 9.9 53.2 10.4 2.1 3,040 4.7 2.6 Duke Energy Corp. Elec/Gas 6 17.99 5.45 2.1 98.0 18.0 0.7 23,910 7.4 4.3 MGE Energy Inc. Elec/Gas 34 40.97 3.66 1.8 58.6 16.0 4.9 947 1.6 1.2 NextEra Energy Elec/Gas 17 55.47 3.97 10.0 46.4 11.7 6.1 23,130 7.1 6.4 Northeast Utilities Elec/Gas 13 34.04 3.23 7.3 56.7 17.5 7.1 6,000 8.7 9.9 NSTAR Elec/Gas 13 45.15 3.77 6.3 50.7 13.5 4.5 4,680 6.6 4.8 OGE Energy Corp. Elec/Gas 5 48.10 3.12 3.4 50.2 16.1 16.1 4,700 1.7 0.9 PG&E Corp. Elec/Gas 6 46.06 3.95 8.3 64.5 16.3 5.7 18,250 14.7 4.1 Public Service Enter. Elec/Gas 7 32.70 4.19 3.0 44.5 10.6 (6.2) 16,540 4.1 2.4 SCANA Corp. Elec/Gas 11 40.48 4.79 2.1 65.1 13.6 4.5 5,150 4.4 5.3 TECO Energy Inc. Elec/Gas 5 18.11 4.75 4.9 77.5 16.3 11.7 3,860 1.4 (4.8) UGI Corp. Elec/Gas 23 31.89 3.14 25.0 40.3 12.9 8.9 3,540 6.7 5.9 UniSource Energy Elec/Gas 12 36.46 4.61 7.7 59.6 12.9 (4.1) 1,330 15.5 17.2 Vectren Corp. Elec/Gas 51 26.32 5.24 1.5 83.6 16.0 8.5 2,150 2.8 3.3 Wisconsin Energy Elec/Gas 8 59.20 3.51 30.0 53.9 15.3 8.4 6,920 12.7 1.6 Xcel Energy Elec/Gas 7 23.94 4.22 3.1 62.3 14.8 5.8 11,020 3.3 (2.7) Averages for 20 Elec/Gas 12.8 35.30 4.26 7.6 60.7 14.3 5.5 8,704 7.6 3.2 AGL Resources AGL Nat. Gas 9 38.01 4.74 2.3 60.0 12.7 5.7 2,960 6.2 5.0 Atmos Energy Nat. Gas 23 33.82 4.02 1.5 67.7 16.8 4.8 3,070 1.6 1.6 Chesapeake Utilities Nat. Gas 7 40.84 3.23 4.8 49.1 15.2 2.7 388 2.7 2.0 Delta Natural Gas Nat. Gas 6 30.96 4.39 4.6 69.0 15.7 n/a 104 2.2 1.6 Energen Corp. Nat. Gas 29 61.10 0.88 3.8 13.4 15.1 6.2 4,390 5.4 4.5 Gas Natural Inc. Nat. Gas 5 10.98 4.92 12.5 36.0 7.3 (30.5) 67 82.5 5.0 Laclede Group Inc. Nat. Gas 8 38.89 4.17 2.5 66.1 15.9 4.0 871 2.7 1.7 MDU Resources Nat. Gas 20 21.47 3.03 3.2 51.2 16.9 9.0 4,040 5.3 5.2 National Fuel Gas Nat. Gas 40 72.90 1.89 3.0 52.1 27.5 14.9 6,000 3.6 3.7 New Jersey Resources Nat. Gas 16 41.83 3.44 5.9 66.7 19.4 5.4 1,730 8.4 5.9 Northwest Natural Gas Nat. Gas 55 47.00 3.70 4.8 61.9 16.7 3.7 1,250 4.9 3.1 ONEOK Inc. Nat. Gas 9 64.57 3.22 8.3 67.1 20.8 11.1 6,910 10.8 11.4 Piedmont Natural Gas Nat. Gas 32 29.30 3.82 3.7 57.1 14.9 5.0 2,120 4.2 4.4 Questar Corp. Nat. Gas 32 17.87 3.41 8.9 31.9 9.4 6.2 3,150 3.9 4.7 RGC Resources Inc. Nat. Gas 8 31.41 4.33 3.0 67.3 15.5 n/a 72 2.3 1.8 Sempra Energy Nat. Gas 8 53.23 3.61 23.1 64.4 17.9 0.0 12,750 6.9 3.2 South Jersey Industries Nat. Gas 12 54.86 2.66 10.6 67.6 25.4 14.2 1,630 9.8 6.4 Southwest Gas Corp. Nat. Gas 5 38.87 2.73 6.0 45.9 16.8 1.8 1,770 3.8 1.9 WGL Holdings Inc. Nat. Gas 34 38.00 3.97 2.7 60.2 15.1 18.4 1,940 2.6 2.0 Averages for 19 Nat. Gas 18.8 40.31 3.48 6.1 55.5 16.6 4.9 2,906 8.9 3.9 American States Water Water 56 33.54 3.10 4.0 70.7 22.8 7.0 625 2.9 2.0 Aqua America Inc. Water 19 22.52 2.75 6.9 68.9 25.0 9.3 3,090 8.1 7.7 Artesian Resources Water 13 19.54 3.87 0.5 72.8 18.8 10.6 148 5.3 4.5 California Water Service Water 44 35.28 3.49 3.4 65.1 18.7 5.5 735 0.9 0.8 Conn. Water Service Water 41 25.49 3.65 2.2 88.6 24.3 0.0 221 1.8 1.5 Consolidated Water Co. Water 13 10.92 2.75 15.4 100.0 36.4 17.4 159 5.0 14.1 Middlesex Water Co. Water 38 18.77 3.89 1.4 78.5 20.2 1.1 292 1.4 1.7 SJW Corp. Water 44 24.82 2.78 1.5 68.3 24.6 9.9 460 4.9 5.2 York Water Company Water 14 16.97 3.09 2.3 74.9 24.2 7.0 215 4.2 4.8 Averages for 9 Water 31.3 23.09 3.26 4.2 76.4 23.9 7.5 661 3.8 4.7 Averages for 58 Utilities 17.7 35.39 3.86 6.5 62.2 16.7 6.0 5,769 8.0 4.6 AT&T Inc. Telecomm 27 28.38 6.06 2.4 51.3 8.5 7.5 167,750 5.4 5.3 Atlantic Tele Network Telecomm 13 38.99 2.26 10.0 33.7 14.9 27.0 600 12.8 11.7 CenturyLink Inc. Telecomm 37 41.18 7.04 3.6 92.7 13.2 1.3 12,450 64.6 31.3 China Mobile Limited Telecomm 5 47.27 3.91 4.3 42.0 10.7 n/a 189,670 n/a n/a Nippon Tel&Tel Telecomm 9 24.48 2.83 10.7 28.1 10.0 3.6 64,780 23.4 13.6 NTT DoCoMo Inc. Telecomm 9 18.78 3.17 9.9 38.9 12.3 3.5 78,090 19.8 n/a Shaw Communications Telecomm 9 21.34 4.31 5.0 89.3 20.7 9.2 9,270 47.2 42.3 Shenandoah Telecom. Telecomm 14 17.50 1.89 3.1 36.3 19.2 (9.5) 415 16.6 11.6 Telefonica S.A. Telecomm 8 25.57 6.85 24.9 51.2 7.5 5.6 115,420 23.4 n/a Telephone & Data Sys. Telecomm 36 33.65 1.34 4.7 32.8 24.6 14.4 3,510 4.9 5.9 Verizon Commun. Telecomm 6 36.92 5.28 2.6 216.7 41.0 17.5 104,370 3.6 2.2 Averages for 11 Telecomm 15.7 30.37 4.08 7.4 64.8 16.6 8.0 67,848 22.2 15.5 Ecology & Environment Waste Mgt. 5 15.11 2.91 4.8 38.9 13.4 14.4 64 5.8 3.5 Republic Services Inc. Waste Mgt. 8 29.61 2.70 5.3 60.6 22.4 14.8 11,370 18.2 n/a Waste Management Waste Mgt. 8 37.06 3.67 7.9 68.7 18.7 12.8 17,620 9.5 62.2 Averages for 3 Waste Mgt. 7.0 27.26 3.09 6.0 56.1 18.2 14.0 9,685 11.2 32.8 Averages for 72 Util.+T/M 17.0 34.28 3.86 6.6 62.4 16.8 6.6 15,416 10.2 6.8 Averages for 447 CCC Co's 16.7 47.91 2.91 8.2 68.2 21.9 12.4 16,745 12.5 10.3
Note that NSTAR (NST) has agreed to be acquired by Northeast Utilities. Also, the list of four-year streaks includes CMS Energy (CMS), NorthWestern Corp. (NWE), and NV Energy (NVE).
Summary
The Utility industry is a traditional source of above average yields and there are several that have established long histories of annual increases. Unlike the subjects of the first two articles in this series (MLPs and REITs), the taxation on these dividends is fairly straightforward, at the 15% rate until at least the end of 2012. I expect that to be the case with subsequent installments in this series that will focus on other industry/sector groups.
Next Up: The Financials
Disclosure: I am long CTL, DUK, EIX, MDU, NEE, NFG, OKE, SCG, T, WTR.
