Electric demand in the United States appears to be ever increasing while at the same time, environmental concerns have made upgrading and expanding the electric grid more challenging for utilities. While many investors have for years looked towards utilities to provide a steady stream of retirement income, the landscape has changed. A little more than a decade ago large markets became deregulated in part or in some case completely. It is hard to forget the rolling blackouts in California during the time Enron was trading in energy. With a different market environment than our grandparents utilities faced, it is maybe more important than ever to scrutinize what stocks make up your retirement portfolio.
This is the next article in my series about stocks that may be appropriate for retirement investing. You may see my previous retirement related articles here, here, here, and here. I use a proprietary blend of technical analysis, financial crowd behavior, and fundamentals in my retirement account investments. The last component for entry is the ability to sell put options at or near the offer price. I want the best of it when I enter into a trade, and I will not start out by paying a spread unless it is less than five cents and/or < 1% of the option premium.
To do well in the market, you should know the stocks you track inside and out. After all, every journey begins with a single step, so let us start by considering some interesting companies, which will give you a starting point for possible stocks that you might buy for your retirement accounts. For selection as a long-term hold in my own retirement accounts, a stock should exhibit the following characteristics:
- A dividend yield higher than I can earn in a bank account.
- Rising revenue year-over-year.
- Rising earnings year-over-year.
- Rising EBITDA year-over-year.
- Option trading available for the lowest risk entry possible.
I have searched for electric utilities that provide different ways to diversify exposure. The list is in no particular order as they all live and die by electricity. The list has been screened for volume traded and market cap in order to avoid the more volatile stocks. In order to make the list, the company must also be paying a dividend. Price appreciation is not what I am searching for, a steady check along with modest growth will do just fine in my opinion. Retirement should be spent cashing checks, not worrying if the check will come.
American Electric Power Company (AEP), together with its subsidiaries, engages in the generation, transmission, and distribution of electric power to retail customers. The company generates electricity using coal and lignite, natural gas, nuclear, and hydroelectric energy. The company was founded in 1906 and is based in Columbus, Ohio.
- Rising revenue year-over-year? Yes, $14.43 billion for 2010 vs. $13.49 billion for 2009
- Rising earnings year-over-year? No, earnings year-over-year of $1.21 billion for 2010 vs. $1.36 billion for 2009.
- Rising EBITDA year-over-year? Yes, $4.44 billion for 2010 vs. $4.43 billion for 2009
- Dividend yield higher than I can earn in a bank account? Yes, 4.75% for 2010 is greater than 1%, which is towards the upper limit that can be achieved in a bank account.
- Option trading available for the lowest risk entry possible? Yes.
In the last month, the stock has decreased in price -4.59 % , in the last quarter, it has returned 7.99%, with a one year change of 1.16%.
Comparing to the S&P 500 price changes, the price performances are 6.52% vs. the S&P 500 from a month ago, 12.44% vs. the S&P 500 from six months ago, and the year to date difference is 6.04% vs. the S&P 500 price change. The stock trades at a Beta of 0.58. A Beta under .75 is very good for retirement investing.
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CenterPoint Energy, Inc. (CNP) operates as a public utility holding company in the United States. The company’s Electric Transmission and Distribution segment provides transmission and distribution services to retail electric providers, municipalities, electric cooperatives, and other distribution companies serving approximately 2.1 million metered customers. The company was founded in 1882 and is headquartered in Houston, Texas.
- Rising revenue year-over-year? Yes, $8.79 billion for 2010 vs. $8.28 billion for 2009.
- Rising earnings year-over-year? Yes, earnings year-over-year of $442.00 million for 2010 vs. $372.00 million for 2009.
- Rising EBITDA year-over-year? Yes, $2.14 billion for 2010 vs. $1.90 billion for 2009.
- Dividend yield higher than I can earn in a bank account? Yes, 4.96% for 2010.
- Option trading available for the lowest risk entry possible? Yes.
Looking at the price movement over the last month, the stock has fallen in price -3.56 % , in the last quarter, it has returned 13.30%, with a one year change of 29.14%.
Comparing to the S&P 500 price changes, the price performances are 7.67% vs. the S&P 500 from a month ago, 30.23% vs. the S&P 500 from six months ago, and the year to date difference is 26.92% vs. the S&P 500 price change. The stock trades at a Beta of 0.70. A Beta under .75 is very good for retirement investing.
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CMS Energy Corporation (CMS) through its subsidiaries, operates as an energy company primarily in Michigan. It operates in three segments: Electric Utility, Gas Utility, and Enterprises. The Electric Utility segment engages in the generation, purchase, distribution, and sale of electricity. The Gas Utility segment involves in the purchase, transmission, storage, distribution, and sale of natural gas. The company was founded in 1987 and is based in Jackson, Michigan.
- Rising revenue year-over-year? Yes, $6.43 billion for 2010 vs. $6.21 billion for 2009.
- Rising earnings year-over-year? Yes, earnings year-over-year of $340.00 million for 2010 vs. $229.00 million for 2009.
- Rising EBITDA year-over-year? Yes, $1.59 billion for 2010 vs. $1.31 billion for 2009.
- Dividend yield higher than I can earn in a bank account? Yes, 4.6%.
- Option trading available for the lowest risk entry possible? Yes.
The forward P/E ratio is 37.04.
Looking at the price movement over the last month, the stock has fallen in price -7.41 % , in the last quarter, it has returned 2.42%, with a one year change of 6.23%.
Comparing to the S&P 500 price changes, the price performances are 3.37% vs. the S&P 500 from a month ago, 6.72% vs. the S&P 500 from six months ago, and the year to date difference is 4.62% vs. the S&P 500 price change. The stock trades at a Beta of 0.58. A Beta under .75 is very good for retirement investing.
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Dominion Resources, Inc. (D) together with its subsidiaries, engages in producing and transporting energy in the United States. It operates in three segments: DVP, Dominion Generation, and Dominion Energy. The DVP segment includes regulated electric transmission and distribution operations that serve residential, commercial, industrial, and governmental customers in Virginia and North Carolina. The company was founded in 1909 and is headquartered in Richmond, Virginia.
- Rising revenue year-over-year? Yes, $15.20 billion for 2010 vs. $14.80 billion for 2009.
- Rising earnings year-over-year? Yes, earnings year-over-year of $2.81 billion for 2010 vs. $1.29 billion for 2009.
- Rising EBITDA year-over-year? Yes, $6.96 billion for 2010 vs. $4.68 billion for 2009.
- Dividend yield higher than I can earn in a bank account? Yes, 4.28% for 2010.
- Option trading available for the lowest risk entry possible? Yes.
In the last month, the stock has decreased in price -1.55 % , in the last quarter, it has returned 12.82%, with a one year change of 8.93%.
Comparing to the S&P 500 price changes, the price performances are 9.91% vs. the S&P 500 from a month ago, 21.93% vs. the S&P 500 from six months ago, and the year to date difference is 19.15% vs. the S&P 500 price change. The stock trades at a Beta of 0.54. A Beta under .75 is very good for retirement investing.
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Ameren Corporation (AEE), through its subsidiaries, operates as a public utility company in Missouri and Illinois, the United States. It engages in rate-regulated electric generation, transmission, and distribution businesses; rate-regulated natural gas transmission and distribution businesses; and merchant generation businesses. The company was founded in 1881 and is headquartered in St. Louis, Missouri.
- Rising revenue year-over-year? Yes, $7.64 billion for 2010 vs. $7.14 billion for 2009.
- Rising earnings year-over-year? No, earnings year-over-year of $139.00 million for 2010 vs. $612.00 million for 2009.
- Rising EBITDA year-over-year? No, $1.76 billion for 2010 vs. $2.24 billion for 2009.
- Dividend yield higher than I can earn in a bank account? Yes, 5.46% for 2010.
- Option trading available for the lowest risk entry possible? Yes.
The P/E ratio has come down, as the current trailing twelve months (ttm) P/E ratio is 72.11, while the forward P/E ratio is now 25.75.
Looking at the price movement over the last month, the stock has fallen in price -4.89 % , in the last quarter, it has returned 4.73%, with a one year change of 2.54%.
Comparing to the S&P 500 price changes, the price performances are 6.19% vs. the S&P 500 from a month ago, 7.50% vs. the S&P 500 from six months ago, and the year to date difference is 3.70% vs. the S&P 500 price change. The stock trades at a Beta of 0.65.
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Constellation Energy Group, Inc. (CEG) operates as an energy company in the United States and Canada. The company develops, owns, operates, and maintains fossil and renewable generating facilities. As of December 31, 2010, it holds interests in qualifying facilities and power projects totaling to 9,030 megawatt (MW), as well as manages approximately 1,100 MW associated with long-dated tolling agreements. The company was founded in 1906 and is based in Baltimore, Maryland.
- Rising revenue year-over-year? No, $1.43 billion for 2010 vs. $15.6 billion for 2009.
- Rising earnings year-over-year? No, earnings year-over-year of $-982.60 million for 2010 vs. $4.44 billion for 2009.
- Rising EBITDA year-over-year? No, -$372 million for 2010 vs. $8.6 billion for 2009.
- Dividend yield higher than I can earn in a bank account? Yes, 3.13% for 2010.
- Option trading available for the lowest risk entry possible? Yes.
The forward P/E ratio is 35.1. In the last month, the stock has decreased in price -8.00 % , in the last quarter, it has returned 9.67%, with a one year change of 20.48%.
Comparing to the S&P 500 price changes, the price performances are 2.71% vs. the S&P 500 from a month ago, 28.02% vs. the S&P 500 from six months ago, and the year to date difference is 24.18% vs. the S&P 500 price change. The stock trades at a Beta of 1.04. A Beta under 1.10, but not much less, is going to trade much like the overall market. This would not be a first choice for retirement accounts.
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Covanta Holding Corporation (CVA), through its subsidiaries, provides waste and energy services in the Americas, Europe, and Asia. It engages in the development, ownership, and operation of infrastructure for the conversion of waste to energy. The company also involves in waste disposal and renewable energy production businesses, as well as independent power production business. As of December 31, 2009, it owned, invested, and/or operated 64 energy generation facilities, which use various fuels, including municipal solid waste, wood waste, landfill gas, water, natural gas, coal, and heavy fuel-oil. In addition, the company owns or operates waste procurement business; landfills for ash disposal; and various waste transfer stations. The company was founded in 1960 and is headquartered in Morristown, New Jersey.
- Rising revenue year-over-year? Yes, $1.58 billion for 2010 vs. $1.38 billion for 2009.
- Rising earnings year-over-year? No, earnings year-over-year of $61.65 million for 2010 vs. $101.65 million for 2009.
- Rising EBITDA year-over-year? No, $343.1 million for 2010 vs. $ 357.45 for 2009.
- Dividend yield higher than I can earn in a bank account? Yes, 8.73% for 2010.
- Option trading available for the lowest risk entry possible? Yes.
Looking at the price movement over the last month, the stock has fallen in price -9.19 % , in the last quarter, it has returned 2.75%, with a one year change of 4.60%.
Comparing to the S&P 500 price changes, the price performances are 1.38% vs. the S&P 500 from a month ago, 1.78% vs. the S&P 500 from six months ago, and the year to date difference is -5.54% vs. the S&P 500 price change. The stock trades at a Beta of 0.67. A Beta under .75 is very good for retirement investing.
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