Thanks to the Fed's massive expansionary policy, government bonds yield almost nothing, if not negative. Given the low yield of bonds, high yield utility stocks offer safe and higher returns.
The utility companies produce and distribute essential services such as electricity, gas, as well as water services. There are integrated companies as well. Most utility companies pay outstanding dividends. Here is a list of 13 high-yield utility large-caps, paying excellent dividends over 4%. Financial data is derived from finviz:
1. American Electric Power Co., Inc. (NYSE:AEP): AEP is a major investor and owner of electric utilities in various locations. AEP owns the nation's largest electricity transmission system, a nearly 39,000-mile (63,000 km) network. The company’s P/E ratio is 14.03, which is slightly higher than the average. The dividend yield is 5.18%, and market cap is $17.07 billion.
2. Dominion Resources, Inc. (NYSE:D): Dominion’s asset portfolio includes power generation, electric transmission lines, natural gas transmission, storage pipelines, as well as natural gas and oil reserves. Dominion Resources operates the nation's largest natural gas storage facility. The company’s market cap is $25.94 billion. Annualized 5 year EPS growth is 27.34%, which is one of the best in the industry. In the next 5 years, EPS is expected to grow by 6.82%. Last year’s dividend yield was 4.40%.
3. Duke Energy Corporation (NYSE:DUK): Duke Energy is the biggest nuclear power company in United States. Duke also has an electricity generation business in Latin America and operates eight hydroelectric power plants in Brazil. The market cap of Duke is $24.56 billion, and its P/E is 18.45, one of the highest in the list. Although EPS growth in the past 5 years was as low as 1.91%, Duke offered a 5.31% dividend yield.
4. Consolidated Edison Inc. (NYSE:ED): Consolidated Edison is one of the largest investor-owned energy companies in the United States. Its P/E ratio is 14.61, close to the average of the list, and the dividend yield is 4.74%.
5. Entergy Corporation (NYSE:ETR): Entergy Corporation is an integrated energy company involved in electric power production, and retail distribution operations. ETR is the second-largest nuclear generator in the United States. The company’s P/E ratio of 10.23 is below the average, and its market cap is $12.7 billion. Last year’s dividends yield is 4.88%. Although the past 5 year EPS growth was 8.64%, it is expected to be 1.35% in next 5 years.
6. Exelon Corporation (NYSE:EXC): Exelon Corporation is an electricity generating and distributing company that operates several nuclear reactors. EPS shares increased by 22.41% annually in past 5 years. Exelon paid a fat dividend yield of 5.17%.
7. FirstEnergy Corporation (NYSE:FE): FE is a diversified energy company that is involved in the generation, transmission, and distribution of electricity, energy management and other energy-related services. FE has an outstanding yield of 5.66%, and estimated EPS growth over the next 5 years is 6.67%.
8. PG & E Corporation (NYSE:PCG): Pacific Gas and Electric Company provides natural gas and electricity. It has a P/E ratio of 16.08 which is slightly above the average. In the last 5 years, EPS increased by 4.4%, annually. Last year’s yield was 4.03%.
9. Public Service Enterprise Group Inc. (NYSE:PEG): Public Service Enterprise is a regulated, publicly owned, gas and electric utility company. It is one of oldest and largest publicly owned utility providers in New Jersey. With a profit margin of 13.20% and low P/E ratio of 10.07, PEG is a value investment. Last year’s dividend yield was 4.43%.
11. PPL Corporation (NYSE:PPL): PPL controls a large electrical generating capacity, and delivers electricity. PPL also provides natural gas delivery services. With a market cap of $13 billion, PPL supports a yield of 5.2%. Analysts have an optimistic EPS growth estimation of 8.10% over the next 5 years.
12. Southern Company (NYSE:SO): Southern Company is one of the largest producers of electricity in the United States and ranks 149th on the Fortune 500 listing of the largest U.S. corporations. Southern Company has thousands of shareholders. It has the largest market cap of the utilities listed here at $32.76 billion and the second highest P/E of 16.34. Moreover, annual estimated EPS growth over the next 5 years is 5.56%. Shareholders enjoy a yield of 4.72% .
13. Xcel Energy Inc. (NYSE:XEL): Xcel Energy serves electricity and natural gas, and operates nuclear plants. Its market cap is $11.64 billion. The P/E ratio of 14.85 is slightly above average. Its profit margin is 7.29%. XEL shareholders enjoyed a yield of 4.20%.
Note that while utilities offer high yields which will surely beat the government bonds, the utility sector has its own risks. Nuclear power and energy generation are particularly important subjects for both political and environmental authorities. The trend for liberalization and increased competition is still going on. No company can keep its monopoly status forever.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.