3 High Yielding International Utilities For 2012 And Beyond

by: Mitchell Harris

Some of the worlds largest utility companies are not located on our shores, and though things are looking bleak across the pond, the lights must stay on, as does the heat and hot water. Here are a few select names to tuck away in your portfolio for 2012. These companies may not be household names to you and I but are the best in class in their respective countries. The dividends as very attractive as well. Good luck!

E.ON. AG (OTCPK:EONGY) is an integrated electricity and gas company which engages in the power generation, energy trading, and gas supply businesses. The company generates electricity from coal, natural gas and oil, nuclear, water, wind, solar, and bio energy. E.ON also involves in the exploration and production of gas in the North Sea, it engages in the storage and transportation of gas, including liquefying natural gas; carbon sourcing; and distribution of power and gas. This company is huge, with a market cap of $32B, and trailing 12 month yield is 8.8%. You are fortunate to get in here after trading down by some 27% in the past 52 weeks. The balance sheet has nearly $4.50 per share in cash. The company just recently decided to cut 11,000 jobs, which represents 14% of its workforce after the German government decided to phase out the nuclear power program by 2022. The company will streamline and save around $13B by 2015. It seems the leaders panicked after the Japanese disaster. Streamlining is always a good thing, and although E.ON AG is the largest utility in the world in terms of sales, put this one away and forget about it.

Gdf Suez S.A (GDFZY.PK) primarily engages in producing and selling natural gas and electricity in France and internationally. The company generates electricity from wind, biomass and biogas, hydro, natural gas, coal, oil, and nuclear sources; and involves in energy trading business, as well as supplies power and gas. It also involves in the exploration and production of oil and gas properties, primarily in the Netherlands, Germany, the United Kingdom, Norway, Algeria, Egypt, Mauritania, the Ivory Coast, the United States, Indonesia, Denmark, and France. This $60B market cap behemoth is down around 26% in the past year, but boasts $10.50 in cash per share on the balance sheet. Its trailing 12 month yield is 7.7%. Last week the company decided to devote 1/3rd of its capital expenditure to fast growing emerging economies in the next 5 years to cut its reliance on Europe. The company also plans on doubling the liquefied natural gas (LNG) sales to emerging markets by 2016, as well as spending $73B in the next 5 years to double its Asia presence. The company feels that Chinese gas consumption will rise four-fold by 2035. All good things.

AES Tiete S.A (OTCPK:AESAY) together with its subsidiaries, engages in the generation and sale of electric power in Brazil. AES owns a generation complex comprising 17 hydroelectric plants with installed capacity of 2,657 mega watts (MW) and physical guarantee averaging 1,280 MW. The company is headquartered in Sao Paulo, Brazil. AES Tiete S.A. is a subsidiary of Companhia Brasiliana de Energia. This company controls 20% of the power distributed in San Paolo, and is the second largest utility in that region. The trailing 12 month yield is 10.7%, and the stock price is only down 2.5% in the past year, as Brazil has not had as rough a time as Europe. Gross revenues from 2010 to 2011 were up 10%. Net revenues grew by 10%, EBITDA grew by 13%, while net income grew by 15%. AES is spending over $50mm in the next 5 years as upgrades to existing facilities are imperative to efficient energy distribution. As far as utilities go, AES has very little debt, which is a long term positive in that industry. And the corporate governance is of low concern as per the Governance Risk Indicator.

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