Utility company stocks have long been the province of “widows and orphans” and retirees due to their safety, stability and high yields. Now with interest rates being depressed across the entire maturity spectrum, utility stocks (and dividend stocks in general) are becoming of greater interest to a broad group of investors.
Today we will examine the five highest yielding utility stocks that are represented in the Standard & Poor’s 500 Stock Index. Those companies are: Pepco Holdings, Inc., Integrys Energy Group, Inc., Duke Energy Corporation, Ameren Corporation and Entergy Corporation.
Pepco Holdings, Inc. (NYSE:POM) 5.60% Yield
Pepco is a $4.33 billion market cap utility that engages in the transmission, distribution and supply of electricity as well as natural gas in the Mid-Atlantic region and Delaware. The company has a book value of $19.07 per share and the payout ratio is 117%. The company is slated to earn $1.25 in the current year (pre Irvine estimate) so the payout ratio should decline back below 90 %. The five year annual dividend growth rate is 1.55% .The current quarterly dividend of $0.27 will be paid on September 30, 2011. The yearly dividend is $1.08 per share.
Integrys Energy Group, Inc. (NYSE:TEG) 5.47% Yield
Integrys is a $3.78 billion market cap utility that operates as a regulated electrical and natural gas utility in Illinois, Wisconsin, Minnesota and Michigan. The company has a book value of $38.27 per share. The payout ratio is 87%. This year’s dividend is $2.72 per share and the current quarter is in the amount of $0.68 will be paid on September 20, 2011. The company is slated to earn $3.34 per share this year so the payout ratio should improve to 81%. The dividend has increased nine of the last ten years.
Duke Energy Corporation (NYSE:DUK) 5.33% Yield
Duke is a $25 billion market cap utility (and about to get $14 billion larger with its Progress energy acquisition) that operates as a regulated electrical and natural gas utility in North Carolina, South Carolina , Ohio, Indiana and Kentucky serving over 4 million customers. The company has a book value of $16.95 per share and their payout ratio is 64%. The current annual dividend is $1.00 per share with the next quarterly dividend of 25 cents payable September 16, 2011 to shareholders of record on August 12, 2011. The company has increased the dividend each of the last four years. Earnings this year are estimated at $1.38 per share.
Ameren Corporation (NYSE:AEE) 5.17% Yield
Ameren is a $7.14 billion market cap utility that operates as a regulated electric and natural gas utility in Missouri and Illinois. The company has a book value of $32.24 per share and a current dividend payout ratio of 264%. Investors would do well to remember that payout ratios of that magnitude are unlikely to continue, and, also that the company reduced the dividend from its long standing annual rate of $2.54 per share to its current $1.54 per share in the first quarter of 2009.We would note that earnings this year are estimated to be $2.39 which would put the payout ratio at a respectable 64%. The current quarterly dividend of $0.385 per share was last declared August 12, 2011 and is payable September 30, 2011 to stock of record on September 8, 2011.
Entergy Corporation (NYSE:ETR) 5.14% Yield
Entergy is an $11.25 billion market cap utility that operates as a regulated electric company in Arkansas, Mississippi, Texas and Louisiana. The company has a book value of $48.62 per share and the payout ratio is a very reasonable 47%. Dividend growth over the past decade has been outstanding as the annual dividend has increased from $1.20 per share in 2000 to $3.24 last year in 2010.
Each of the above five utility companies being S&P 500 Index members have multi-billion dollar market caps. Being utility companies both their financial results and dividends are somewhat insulated from the current market volatility providing a “high yield oasis” for investors in search of yield and stability.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.