Looking to make a stock play on our energy future that will pay you reliable dividends? Take a look at ABB, based in Zurich, Switzerland, which is in the mundane business of power systems: Producing power, distributing power, industrial and commercial power.
What makes this a renewable energy play? Take a look at the monthly energy review of the Energy Information Administration (PDF file). The headline most are reading from the report is that renewable sources have now passed nuclear power, and are now approaching the amount of energy we get from domestic crude oil.
But I was more interested in an inside chart, showing the major sources of residential and consumer energy consumption. The red line represents losses, mostly in the production, distribution, and use of electricity. It's been the leading use of power since 1970, and it's about twice our total use. In other words, the cheapest form of renewable power is reducing the waste of electricity.
There are many ways you can do this in your own work or business. Changing light bulbs to flourescents or (even better) LEDs is the best-known. Another way is to buy new appliances, or combine functions. An older digital video recorder and set-top box, used separately, use more power than the average refrigerator. And you can buy systems that turn off the power to your devices when they're not in use.
Inverters that change AC power to DC power, like that used in your laptop, are also big energy wasters. If you're connected via a laptop now, feel that box that sits between the wall and your PC. It's warm, isn't it? That's waste.
But the big money and big savings come in the transmission system: Transformers, which step up or step down voltages. Electric utilities can save millions of dollars by improving their distribution systems. Right now, they can save a lot more that way than buying power from all the wind and solar farms they use, at lower cost.
Within this space, ABB is the purest play, the best-managed of the lot, and the fastest-growing. It's been on a buying spree, acquiring other companies focused on this opportunity. In fact, it's got plays across the renewable sector.
Now here's the best news. You get a tidy dividend, 64 cents per share last year, 48 cents the year before. The P/E is a decent 21.69. The ratio of debt to assets, 6.0, is modest for its industry group. It's a conservative investment that has outperformed the Dow over the last decade by a lot.
I might like a taste of that myself.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.