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Utility companies are generally considered a safe investment. The companies are natural monopolies but their earnings (rate of return) are predetermined by regulatory agencies. This limits their profits on one hand but (depending on the regulatory agency) guarantees a profit on the other. Utility companies growth prospects are tied directly to gross domestic product, demographics and their ability to expand through acquisitions. Although the stock of these companies generally don't demonstrate much in the way of capital appreciation, the companies are renowned for paying out hefty dividends.

Southern Company (SO): By market capitalization, Southern Company is the second largest electric utility company in the United States. The company provides electricity to North and South Carolina, Alabama, Georgia, Florida and Mississippi. The stock is in an established upward trend that has brought it from around $38 per share a year ago to the $45 to $47 per share level it's at today. In addition to this capital appreciation the company pays out a dividend of $1.89 on an annual basis that produces a dividend yield of 4.2% at the stock's current price. The dividend is paid out and raised on a consistent basis and the payout ratio (trailing twelve months) is above the industry average of 60%, coming in at 73%. In my opinion, the company is taking a moderate (financial) risk in the construction of a two new nuclear plants. Although nuclear power is considered "green" in terms of carbon emissions presently, it would only take a slight mishap to start that green to glow fluorescently. Furthermore, the question of what to do with the radioactive waste the plants produce is still a subject of debate. The company's two closest competitors are CenterPoint Energy, Inc (CNP) with a PEG ratio of 2.92 and Entergy Corporation (ETR) with a PEG ratio of 6.02. Southern Company is moderately priced at this point with a PEG ratio of 3.34.

UniSource Energy (UNS): UniSource Energy, in my opinion, is taking a much less risky approach to the inevitable rise in electricity producing costs. The company is investing heavily in renewable energy such as solar power. This approach not only protects the company's brand reputation it also comes with widespread government and public support. UniSource Energy also has come out with the novel idea of supplying its customers (at no cost) with free thermostats that allow users to adjust temperature remotely-- to reduce energy consumption and lower their electric bills. The stock in the company has remained range bound between $33 per share and $40 per share for the past year. However, the company pays a dividend of $1.68 per share (annualized) that produces a dividend yield of 4.4% at the stock's current price. The dividend is paid and raised on a consistent basis and the payout ratio (trailing twelve months) is slightly below the industry average of 60% coming in at 57%. The company's two nearest competitors in this market are Pinnacle West Capital Corporation (PNW) and PNM Resources, Inc. (PNM). Pinnacle West Capital currently has a PEG ratio of 3.11 and PNM Resources currently has a PEG ratio of 1.42. UniSource Energy is a little pricy by comparison with a PEG ratio of 5.16.

Entergy (ETR): As one of the nation's largest integrated energy companies Entergy's customer base is located in four states on the gulf coast. Through four coal burning power plants in each of these states it generates and transmits electricity to local residents and businesses. The company also operates six nuclear power plants in the northern part of the country and sells the electricity to wholesale customers. The company's stock has been trending higher from its low point in August of $58 per share and is presently at $68.24 per share. In addition to capital appreciation the company pays out a dividend of $3.32 per share on an annual basis, this produces a dividend yield of 4.9% at the stock's current price. The dividend is paid out and raised on a consistent basis and the payout ratio (trailing twelve months) is 44%-- well below the industry average of 60%. I think Entergy carries more risk than the average utility company. Since most of its customers are located in the gulf coast, their infrastructure is at risk from hurricanes that strike the area quite often. In fact the company has to pay higher insurance premiums for this very reason. The company's two nearest competitors in this market are National Grid Transco (NGG) with a PEG ratio of 3.01 and TECO Energy (TE) with a PEG ratio of 3.69. Entergy is relatively expensive with a PEG ratio of 6.02.

Pacific Gas & Electric (PCG): Pacific Gas & Electric provides gas and electricity to most of central and northern California. The company operates hydroelectric, nuclear, and fossil-fuel burning plants to supply 40% of its customers present demands and purchases the remaining 60% on the open market. The company's stock has been trending downward over the past twelve months and has fallen from the $47 per share level to the low $40 level over the period. Pacific Gas & Electric does however pay out a dividend of $1.82 per share, which translates into about a 4.4% dividend yield. The dividend is paid out and raised on a consistent basis and the payout ratio (trailing twelve months) is 72%-- well above the industry average of 60%. The company has plans to develop a solar thermal power plant with Spanish developer Abengoa but there is a lot of uncertainty as to whether projects in renewable energy in general will ever be profitable. In my opinion, this will happen sooner or later as fossil fuel becomes more expensive and the costs of renewable energy decrease-- along with the technologies advancement. The company's two nearest competitors in this market are Edison International (EIX) with a PEG ratio of 2.81 and Sempra Energy (SRE) with a PEG ratio of 1.92. Pacific Gas & Electric is moderately priced by comparison with a PEG ratio of 2.77.

Edison International (EIX): Edison International produces electricity in various locations across the nation. It is one of the few utility companies that have excess capacity and sells this excess to other utility companies that run a deficit. The stock in the company is in a well established upward trend and is hitting new 52 week highs on a daily basis. In addition to this capital appreciation the company pays out a dividend of $1.30 per share on an annual basis. This produces a dividend yield of 3.2% at the stock's current price. The dividend is paid out and raised on a consistent basis and the payout ratio (trailing twelve months) is well below the industry average of 60% coming in at 43%. The company's most recent project in renewable energy has just gone into commercial operation on the Maryland-West Virginia border. This adds to the company's well diversified portfolio of electricity producing methods which include: wind, solar, biomass, geothermal and hydropower. In my opinion this diversification and ability to produce excess capacity make the company one of the lowest risk utility companies in the United States. The company's two closest competitors The AES Corporation (AES) with a PEG ratio of 1.60 and Pacific Gas & Electric Co. with a PEG ratio of 2.77. Edison International is slightly more expensive by comparison with a PEG ratio of 2.81.

Source: 5 Utilities To Boost Dividends