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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.

BKH

Electric

41

30.82

4.74

1.4

83.4

17.6

16.9

1,210

2.4

2.9

Consolidated Edison

ED

Electric

37

49.98

4.80

0.8

69.2

14.4

4.2

14,590

0.9

0.9

Edison International

EIX

Electric

8

37.12

3.45

1.6

32.2

9.4

(14.3)

12,090

4.7

1.3

Empresa Nacional

EOC

Electric

7

52.19

2.95

45.6

37.4

12.7

10.0

14,230

48.2

52.2

ITC Holdings Corp.

ITC

Electric

6

68.55

1.95

4.7

47.2

24.1

22.5

3,480

20.1

n/a

Portland General Elec.

POR

Electric

5

23.42

4.44

2.0

72.7

16.4

7.0

1,760

n/a

n/a

PPL Corp.

PPL

Electric

9

25.43

5.51

1.4

64.5

11.7

(9.7)

12,290

7.8

10.2

Southern Company

SO

Electric

9

38.11

4.78

4.0

76.8

16.1

7.1

32,160

4.1

3.0

TransAlta Corp.

TAC

Electric

5

21.16

5.28

8.1

100.7

19.1

15.7

4,660

5.0

n/a

Westar Energy

WR

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.

LNT

Elec/Gas

8

39.38

4.32

7.6

65.1

15.1

5.9

4,370

8.5

(2.3)

Avista Corp.

AVA

Elec/Gas

9

22.32

4.93

10.0

66.7

13.5

6.3

1,270

12.9

7.6

CenterPoint Energy

CNP

Elec/Gas

6

15.86

4.98

1.3

75.2

15.1

10.3

6,710

21.1

(6.3)

Dominion Resources

D

Elec/Gas

8

45.63

4.32

7.7

41.4

9.6

2.9

26,560

6.4

3.6

DPL Inc.

DPL

Elec/Gas

6

26.02

5.11

9.9

53.2

10.4

2.1

3,040

4.7

2.6

Duke Energy Corp.

DUK

Elec/Gas

6

17.99

5.45

2.1

98.0

18.0

0.7

23,910

7.4

4.3

MGE Energy Inc.

MGEE

Elec/Gas

34

40.97

3.66

1.8

58.6

16.0

4.9

947

1.6

1.2

NextEra Energy

NEE

Elec/Gas

17

55.47

3.97

10.0

46.4

11.7

6.1

23,130

7.1

6.4

Northeast Utilities

NU

Elec/Gas

13

34.04

3.23

7.3

56.7

17.5

7.1

6,000

8.7

9.9

NSTAR

NST

Elec/Gas

13

45.15

3.77

6.3

50.7

13.5

4.5

4,680

6.6

4.8

OGE Energy Corp.

OGE

Elec/Gas

5

48.10

3.12

3.4

50.2

16.1

16.1

4,700

1.7

0.9

PG&E Corp.

PCG

Elec/Gas

6

46.06

3.95

8.3

64.5

16.3

5.7

18,250

14.7

4.1

Public Service Enter.

PEG

Elec/Gas

7

32.70

4.19

3.0

44.5

10.6

(6.2)

16,540

4.1

2.4

SCANA Corp.

SCG

Elec/Gas

11

40.48

4.79

2.1

65.1

13.6

4.5

5,150

4.4

5.3

TECO Energy Inc.

TE

Elec/Gas

5

18.11

4.75

4.9

77.5

16.3

11.7

3,860

1.4

(4.8)

UGI Corp.

UGI

Elec/Gas

23

31.89

3.14

25.0

40.3

12.9

8.9

3,540

6.7

5.9

UniSource Energy

UNS

Elec/Gas

12

36.46

4.61

7.7

59.6

12.9

(4.1)

1,330

15.5

17.2

Vectren Corp.

VVC

Elec/Gas

51

26.32

5.24

1.5

83.6

16.0

8.5

2,150

2.8

3.3

Wisconsin Energy

WEC

Elec/Gas

8

59.20

3.51

30.0

53.9

15.3

8.4

6,920

12.7

1.6

Xcel Energy

XEL

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

ATO

Nat. Gas

23

33.82

4.02

1.5

67.7

16.8

4.8

3,070

1.6

1.6

Chesapeake Utilities

CPK

Nat. Gas

7

40.84

3.23

4.8

49.1

15.2

2.7

388

2.7

2.0

Delta Natural Gas

DGAS

Nat. Gas

6

30.96

4.39

4.6

69.0

15.7

n/a

104

2.2

1.6

Energen Corp.

EGN

Nat. Gas

29

61.10

0.88

3.8

13.4

15.1

6.2

4,390

5.4

4.5

Gas Natural Inc.

EGAS

Nat. Gas

5

10.98

4.92

12.5

36.0

7.3

(30.5)

67

82.5

5.0

Laclede Group Inc.

LG

Nat. Gas

8

38.89

4.17

2.5

66.1

15.9

4.0

871

2.7

1.7

MDU Resources

MDU

Nat. Gas

20

21.47

3.03

3.2

51.2

16.9

9.0

4,040

5.3

5.2

National Fuel Gas

NFG

Nat. Gas

40

72.90

1.89

3.0

52.1

27.5

14.9

6,000

3.6

3.7

New Jersey Resources

NJR

Nat. Gas

16

41.83

3.44

5.9

66.7

19.4

5.4

1,730

8.4

5.9

Northwest Natural Gas

NWN

Nat. Gas

55

47.00

3.70

4.8

61.9

16.7

3.7

1,250

4.9

3.1

ONEOK Inc.

OKE

Nat. Gas

9

64.57

3.22

8.3

67.1

20.8

11.1

6,910

10.8

11.4

Piedmont Natural Gas

PNY

Nat. Gas

32

29.30

3.82

3.7

57.1

14.9

5.0

2,120

4.2

4.4

Questar Corp.

STR

Nat. Gas

32

17.87

3.41

8.9

31.9

9.4

6.2

3,150

3.9

4.7

RGC Resources Inc.

RGCO

Nat. Gas

8

31.41

4.33

3.0

67.3

15.5

n/a

72

2.3

1.8

Sempra Energy

SRE

Nat. Gas

8

53.23

3.61

23.1

64.4

17.9

0.0

12,750

6.9

3.2

South Jersey Industries

SJI

Nat. Gas

12

54.86

2.66

10.6

67.6

25.4

14.2

1,630

9.8

6.4

Southwest Gas Corp.

SWX

Nat. Gas

5

38.87

2.73

6.0

45.9

16.8

1.8

1,770

3.8

1.9

WGL Holdings Inc.

WGL

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

AWR

Water

56

33.54

3.10

4.0

70.7

22.8

7.0

625

2.9

2.0

Aqua America Inc.

WTR

Water

19

22.52

2.75

6.9

68.9

25.0

9.3

3,090

8.1

7.7

Artesian Resources

ARTNA

Water

13

19.54

3.87

0.5

72.8

18.8

10.6

148

5.3

4.5

California Water Service

CWT

Water

44

35.28

3.49

3.4

65.1

18.7

5.5

735

0.9

0.8

Conn. Water Service

CTWS

Water

41

25.49

3.65

2.2

88.6

24.3

0.0

221

1.8

1.5

Consolidated Water Co.

CWCO

Water

13

10.92

2.75

15.4

100.0

36.4

17.4

159

5.0

14.1

Middlesex Water Co.

MSEX

Water

38

18.77

3.89

1.4

78.5

20.2

1.1

292

1.4

1.7

SJW Corp.

SJW

Water

44

24.82

2.78

1.5

68.3

24.6

9.9

460

4.9

5.2

York Water Company

YORW

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.

T

Telecomm

27

28.38

6.06

2.4

51.3

8.5

7.5

167,750

5.4

5.3

Atlantic Tele Network

ATNI

Telecomm

13

38.99

2.26

10.0

33.7

14.9

27.0

600

12.8

11.7

CenturyLink Inc.

CTL

Telecomm

37

41.18

7.04

3.6

92.7

13.2

1.3

12,450

64.6

31.3

China Mobile Limited

CHL

Telecomm

5

47.27

3.91

4.3

42.0

10.7

n/a

189,670

n/a

n/a

Nippon Tel&Tel

NTT

Telecomm

9

24.48

2.83

10.7

28.1

10.0

3.6

64,780

23.4

13.6

NTT DoCoMo Inc.

DCM

Telecomm

9

18.78

3.17

9.9

38.9

12.3

3.5

78,090

19.8

n/a

Shaw Communications

SJR

Telecomm

9

21.34

4.31

5.0

89.3

20.7

9.2

9,270

47.2

42.3

Shenandoah Telecom.

SHEN

Telecomm

14

17.50

1.89

3.1

36.3

19.2

(9.5)

415

16.6

11.6

Telefonica S.A.

TEF

Telecomm

8

25.57

6.85

24.9

51.2

7.5

5.6

115,420

23.4

n/a

Telephone & Data Sys.

TDS

Telecomm

36

33.65

1.34

4.7

32.8

24.6

14.4

3,510

4.9

5.9

Verizon Commun.

VZ

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

EEI

Waste Mgt.

5

15.11

2.91

4.8

38.9

13.4

14.4

64

5.8

3.5

Republic Services Inc.

RSG

Waste Mgt.

8

29.61

2.70

5.3

60.6

22.4

14.8

11,370

18.2

n/a

Waste Management

WM

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.

Source: Dividend Champions: Focus on Utilities