9 Consistent Growth, 3%+ Yielding Utilities

Includes: CMS, D, DTE, ES, EXC, LNT, NEE, NVE, PEG
by: Insider Monkey

Dividend stocks are attracting a lot of attention the past few years. Defensive investors especially like dividend stocks with consistent growth as these stocks can help them to achieve sustainable profits. We have been dealing with one financial crisis after another and central banks all over the world have been using expansionary monetary policies. We do not like the Fed's inflationary monetary policy, such as the ultra-low interest rate, and we are concerned that such policy will lead to inflation. There is a huge bubble in long-term Treasuries. So, we have been recommending investors to focus on dividend stocks, especially those with consistent growth.

Some sectors, like the utilities sector, contain many high dividend yielding stocks that have achieved consistency in earnings growth. Below we compiled a list of high dividend US utilities stocks with consistent growth. All companies have at least $2 billion market cap, dividend yields higher than 3% and EPS growth rate above 10% per year over the past five years. These stocks yield 50% more than the 10-year Treasuries and are expected to boost their dividends considerably over the next 10 years.



Dividend Yield

EPS growth


CMS Energy Corp.




Dominion Resources, Inc.




DTE Energy Co.




Exelon Corporation




Alliant Energy Corporation




NextEra Energy, Inc.




Northeast Utilities




NV Energy, Inc.




Public Service Enterprise Group Inc.



Alliant Energy Corporation has the highest average growth rate over the past five years. Its EPS grew at 40.22% per year in the past five years and it has a dividend yield of 4/21%. Alliant Energy mainly provides regulated electricity service to about one million electric customers in the Midwest. It also provides regulated natural gas services to approximately 412,000 natural gas customers in that area. LNT has a market cap of $4.7B and a P/E ratio of 16.19. There are 14 hedge funds with LNT positions at the end of the third quarter last year. For example, Cliff Asness' AQR Capital Management had $8.2 million invested in LNT. Israel Englander, Jim Simons, and Ray Dalio are also bullish about LNT. LNT was up 11.68% so far since the end of September, versus 17.05% for SPY in the same period.

Exelon Corporation also has a high growth rate of 22.41% annually over the past five years. It also has the highest dividend yield among the utilities stocks listed above. It has a dividend yield of 5.27% and a market cap of $26B and a low P/E ratio of 10.97. Exelon is an electric utilities company. As of September 30, 2011, twenty-three hedge funds reported to own EXC in their 13F portfolios. For example, Jim Simons' Renaissance Technologies initiated a brand new $64 million of EXC over the third quarter. Steven Cohen's SAC Capital Advisors also had $51 million invested in this stock at the end of September. EXC lost 5.41% since then, but EXC is still attractive as its low P/E ratio indicates that it may be trading at a discount.

Dominion Resources Inc also has a high EPS growth rate in the past five years. Its EPS grew at 27.34% on average per year over the past five years and it has a dividend yield of 3.90%. Dominion is a producer and transporter of energy. It generates and transmits electricity, and gathers, stores, and transmits natural gas. D has a market cap of $29B and a P/E ratio of 19.27. As of September 30, 2011, there are 14 hedge funds disclosed owning D positions in their 13F portfolios. Jim Simons is bullish about D as well. His Renaissance Technologies initiated a brand new $36 million of D over the third quarter. Israel Englander's Millennium Management also significantly boosted its D stakes to $18 million in the third quarter.

These utilities stocks did not perform so well since the end of September last year. Most of them underperformed the market in that period. But these stocks are also trading at attractive multiples. All of the high dividend utilities stocks listed above have P/E ratios and forward P/E ratios of lower than 20. Additionally, they are also able to deliver decent returns by paying fat dividends consistently. We encourage investors to do some deep research on these stocks and consider purchasing some of the stocks for their own portfolios.

Disclosure: I am long PEG.