European leaders may have tentatively approved a 50% haircut on Greek sovereign bonds, but Italy and Spain are still confronting budgetary problems and economic stagnation. Additionally, Chinese economic growth is slowing alongside high inflation. The US also has also experienced its own inflation problems with CPI (pdf) posting a 19.3% increase in energy, and a 4.7% increase in food prices. Also, not too long ago the 10-year Treasuries were below 2%. Today, the 30-year bond yield is up 20 basis points to 3.45%, but it peaked at 4.7% on February 18, 2011. Do not forget about the misses by Wells Fargo (WFC), Amazon.com (AMZN), and Apple (AAPL). All of these factors may send you searching for more stable equities with good dividend yields and better returns.
I ran a stock screen among mid-cap companies and large-cap companies, and focused on utilities and energy companies with dividend yields above 4%. Here is what I found:
(Click charts to expand)
CMS Energy (CMS) is an electric and gas utility operating primarily in Michigan. Year to date, CMS has beaten the S&P 500 (SPY) by 13.43%. The company also recently exceeded consensus Q3 non-GAAP EPS of $0.52 with $0.53. Gross margins have consistently improved since 2007. After facing drawbacks from the recession, revenue has returned to 2007 levels, and it is also up by 2.8% in 9M11 (vs. 9M10). The company also lies in a friendlier regulatory environment in Michigan. On July 21, 2011, the company met the highest customer demand for electricity in its 125-year history.
The dividend yield is 3.8%. The next dividend payment occurs on November 30, with a record date of Friday, November 4. CMS closed at $21.38 on Thursday, October 27. View a presentation by the company here (pdf).
Duke Energy (DUK) is an electric and gas utility in central and western North Carolina, western South Carolina, central, north central and southern Indiana, northern Kentucky, southwestern Ohio, and Latin America. (Latest company presentation .pdf). For the year to date, DUK is 15.31% higher than the S&P 500. Gross margins are also back up to 2006 levels. The company has beat consensus non-GAAP EPS estimates in 8 out of the 9 last quarters. The company is set to report Q3 results on Thursday, November 3. The consensus expects $0.46 in non-GAAP EPS. For the full year 2011, the company expects non-GAAP EPS to be between $1.35 and $1.40. This is much higher than the reported 2010 non-GAAP EPS of $1.00. In January 2011, the company declared a merger with North Carolina-based Progress Energy.
On June 21, 2011, the company voted to raise its dividend to $0.25 per share, which gives a dividend yield of 4.8%. The next dividend payment is on December 16, with a record date of November 18. DUK closed at $20.63 on Thursday, October 27.
NiSource (NI) engages in the transmission, storage and distribution of natural gas in the vast area stretching from the Gulf Coast through the Midwest to New England and the generation, transmission and distribution of electricity in Indiana. Here is a link to their latest presentation (pdf). Year to date, NI is +28.52% compared with the S&P 500. The operating margins have gone up since 2008, and non-GAAP EPS was up by 31.65% in 2010 to $1.04. In Q2 2011, the company beat the non-GAAP consensus by $0.01, which was also +$0.04 (+30.76%) compared with Q2 2010. The company also has a manageable debt-to-equity ratio of 1.27 with a S&P credit rating of BBB-.
The dividend yield is 4.0%. The next payment date is November 18, but to earn it, you must be an investor of record at Monday, October 31. NI closed at $22.40 on Thursday, October 27.
The company reports Q3 earnings on Friday, October 28.
Pepco (POM) is an electric and natural gas utility in the Mid-Atlantic region, serving about 1.9 million customers in Delaware, the District of Columbia, Maryland, and New Jersey. Year to date, POM has beaten the S&P 500 by 8.40%. The gross margins have crossed into 30+ % territory after spending 2008 and 2009 in the 20s. After posting ($0.08) in the first 6 months of 2010, the company has turned the corner and earned $0.70 in the same period this year, mainly due to reduced fuel expenses. The company reports Q3 earnings on Friday, November 4. View a company presentation here (pdf).
The dividend yield is 5.2%. It is payable on December 30, to shareholders of record on December 12. The company has paid dividends since 1904. On Thursday, October 27, POM closed at $20.20.
Provident Energy (PVX) is based in Calgary, Canada, and owns and manages a natural gas liquids (NGL) infrastructure and logistics business. Its midstream facilities are located in Western Canada and in the NGL markets in Eastern Canada. It is Canada’s largest pure-play NGL corporation, and second largest NGL operator (pdf). Year to date, PVX is +17.56% over the S&P 500’s performance. Unlike the other companies on this list, margins have worsened across the board. However, the company has positioned itself to reap future growth from its assets in Montney, Marcellus, Bakken, and Alberta oil sands.
The company pays dividends on a monthly basis of $0.045 CAD ($0.04537), which gives a dividend yield of 5.8%. The next dividend payment should occur in mid-December for investors of record in mid-November. On Thursday, October 27, PVX closed at $9.23.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
