High Yield Large Cap Energy Utilities: Recent Performance and Dividend Growth, Part 2

Includes: DUK, ED, ETR, PCG, PEG, PPL, XEL
by: Zvi Bar

<< Return to Part 1

Utilities are purveyors of necessities and usually at a government-regulated price and with restricted competition. Due to the government control of energy production and distribution and the growing need for power, energy utilities are generally considered reliable and predicable businesses.

The regulated pricing for energy tends to make utility dividends reasonably secure and somewhat predictable, though this security means that the dividends are unlikely to grow at a rapid pace. Utilities are also generally far less volatile than the market and the demand for utilities only increases over time as technology advances into new realms and the population continues to grow.

I previously identified the six largest energy utilities within in the S&P 500 that have a yield of over 4%. This article continues this energy utility dividend growth project, reviewing the dividends of seven additional large-cap energy utilities that yield at least 4%. These seven are also all S&P 500 members. The prior list discussed companies with a market valuation of $18 billion or higher, while these seven all have market values between $11 billion and $17 billion

The following is an analysis of their dividends over the last 5 years, as well as their present yield and 2011-to-date performance:

1. Consolidated Edison Inc. (NYSE:ED)

  • Yield: 4.5%
  • 2011-to-date Performance: 7.41%

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2. Entergy Corporation (NYSE:ETR)

  • Yield: 4.9%
  • 2011-to-date Performance: -4.92%

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3. PG&E Corp. (NYSE:PCG)

  • Yield: 4.3%
  • 2011-to-date Performance: -11.83%

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4. PPL Corporation (NYSE:PPL)

  • Yield: 5%
  • 2011-to-date Performance: 5.54%

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5. Progress Energy Inc. (PGN)

  • Yield: 5.2%
  • 2011-to-date Performance: 9.41%

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6. Public Service Enterprise Group Inc. (NYSE:PEG)

  • Yield: 4.3%
  • 2011-to-date Performance: 0.09%

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7. Xcel Energy Inc. (NYSE:XEL)

  • Yield: 4.3%
  • 2011-to-date Performance: 2.04%

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PCG's equity has performed the worst out of the group so far in 2011, down almost 12 percent. Meanwhile PPL, PGN and ED are all up between 5 & 10 percent. The effect of the Japanese nuclear power crisis and related concerns following the March earthquake and tsunami double-disaster is also quite apparent on the sector. See the group performance chart below:

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ED, ETR, PCG, PEG and XEL have experienced fairly straightforward dividend increases and investors have probably come to expect the nearly formulaic annual dividend boosts that have generally occurred. Investors may expect PCG and PEG to raise their dividends later in 2011 in order to maintain the line and the equity may temporarily suffer if they do not. PGN and PPL also both appear overdue to increase their dividends. It appears likely that several of these companies will institute additional dividend increases in the coming quarters. Nonetheless, this group already provides an income investor with a yield comparable or higher than a 30-year treasury.

Disclaimer: This article should not be construed as personalized investment advice as it does not take into account your specific situation or objectives.

Disclosure: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.