Seeking Alpha
Profile| Send Message|
( followers)  

A utility company's performance is primarily tied to gross domestic product, demographics and its ability to expand through acquisitions. Although the stock of these companies generally don't appreciation much, the companies are renowned for paying out hefty dividends. In this article, I will explore five utilities companies that are well positioned to pay hefty dividends in 2012. I chose these five income stocks because they are capitalizing on this economic climate through acquisitions, partnerships, diversification, and making adjustments to remain competitive.

Avista Corporation (NYSE:AVA): Avista Corporation has been range bound over the past year between $20 and $27 per share but has been trading in the upper quartile of that range for the past four months. In addition to this capital appreciation the company pays out a dividend of $1.16 per share that brings in a dividend yield of 4.5% at the stock's current price. The payout ratio on the stock is 61%, which is right in line with the industry average of 60%. This dividend is both paid out and raised on a consistent basis. The company currently has a PEG ratio of 3.15 which is a little pricy compared to its nearest competitor IDACORP, Inc. (NYSE:IDA) with its PEG ratio of 2.45. Avista Corporation is based in Spokane, Washington were it was incorporated in 1889. The company generates and distributes electricity which it produces primarily from hydroelectric and thermal sources. In addition to electricity the company also distributes natural gas to its customers in eastern Washington, northern Idaho and parts of Oregon. Besides the company's energy business it also manufactures custom sheet metal fabrication and has investments in real estate as well as emerging technology venture capital funds and low income housing. In my opinion, the company's diversification adds an extra level of security to the stock. The company assets are spread out among various sectors and their higher risk ventures are offset in much lower risk sectors giving the company an added measure of stability not found in pure play energy companies. I believe this stock is well positioned for growth in the coming quarters.

Portland General Electric (NYSE:POR): Portland General Electric has been range bound over the past year between $20 and $26 per share but has been trending upward for the past six months and is approaching its 52 week high. In addition to this capital appreciation the company also pays out a dividend of $1.06 per share that brings in a dividend yield of 4.2% at the stock's current price. The payout ratio on the stock is 55% which is slightly below the industry average of 60%. The company currently has a PEG ratio of 2.50 which is cheaper than its nearest competitor Allete, Inc. (NYSE:ALE) with its PEG ratio of 2.45-- in terms of growth. Portland General Electric is based in Portland, Oregon and was founded in the area in the 1930's. The company generates and distributes electricity and natural gas in the region. The electric power it produces primarily through hydroelectric, thermal and wind resources. The excess capacity Portland General Electric generates it sells in the wholesale market. I think Portland General Electric's growth prospects are better than the average utility company since it is located in an area that is experiencing population growth and is well entrenched in renewable energies. What's more, the company is looking for partners in its planned expansion. I firmly believe this company is headed in the right direction to grow dividends this year.

NiSource Inc (NYSE:NI): NiSource Inc is in a well established upward trend that has taken the stock from $18 per share one year ago to the $23 to $24 per share range. In addition to this capital appreciation the company also pays out a dividend of $.92 per share that brings in a dividend yield of 4% at the stock's current price. The company has been paying out this dividend consistently since 2004.The payout ratio on the stock is 88% of the company's earnings, which is well above the industry average of 60%. I think this may prove to be a problem if the company plans on expansion. The company will have to either cut its dividend or increase its debt to expand, if it cannot increase its revenues beforehand. The company currently has a five year expected PEG ratio of only 1.91 which is much cheaper than its nearest competitor FirstEnergy Corporation (NYSE:FE) with its five year expected PEG ratio of 8.97. NiSource Inc. is another old well established company that will be celebrating its 100 year anniversary this year. Headquartered in Merrillville, Indiana the company supplies electric and natural gas services to Indiana, Ohio, Pennsylvania, Virginia, Kentucky, Maryland and Massachusetts. Since many of these states are planning on converting to open markets, the company will have to adjust to these new forces soundly to maintain its dividend and remain competitive. Yet, I think NiSource will continue to pay its dividend and increase its debt to expand, as the company has a strong history of adjusting to new market conditions.

Public Service Enterprise Group (NYSE:PEG): Public Service Enterprise Group has been range bound over the past year between $28 and $36 per share and is now treading water at the $30 per share level. The company does however pay out a dividend of $1.37 per share that brings in a dividend yield of 4.5% at the stock's current price. The payout ratio on the stock is 53% which is slightly below the industry average of 60%. The company currently has a PEG ratio of 5.59 which is slightly more expensive, in terms of growth, than its nearest competitor Consolidated Edison, Inc. (NYSE:ED) with its PEG ratio of 4.31. Public Service Enterprise Group is based in Newark, New Jersey and was incorporated in 1985. The company's distribution areas are primarily in the northeastern and mid Atlantic states. Public Service Enterprise Group operates as a wholesale energy supply company and generates electricity through its nuclear, coal, gas, and oil-fired generation facilities. In addition to distributing natural gas and electricity the company also invests in the development of solar generation projects and energy efficiency programs. Public Service Enterprise Group also operates in several areas that are converting to open markets but the company's holdings in nuclear and solar generation projects insulate it somewhat from the eventual price rise in coal, gas, and oil. (input costs) I believe this gives the company a competitive advantage over its opposition which do not have these resources, therefore, I expect this stock to continue paying a high dividend.

El Paso Electric Company (NYSE:EE): El Paso Electric Company is in a well established upward trend that has taken the stock from $27 per share one year ago to the $33 to $36 per share range. In addition to this capital appreciation the company also pays out a dividend of $0.88 per share that brings in a dividend yield of 2.6% at the stock's current price. The payout ratio on the stock is 17% which is well below the industry average of 60%. The company currently has a PEG ratio of 3.07 which is slightly cheaper than its nearest competitor Avista Corporation with its PEG ratio of 3.15-- in terms of growth. In my opinion, El Paso Electric Company is set up very well for growth potential-- with its location in El Paso, Texas it can take advantage of local weather patterns for production of both wind and solar power. The company generates electricity through its nuclear, natural gas, and coal power plants as well and distributes this electricity to its customers in west Texas and southern New Mexico. Furthermore, El Paso Electric Company produces excess capacity and sells this excess to wholesale customers. The company has a customer base which also represents a source of future growth such as the United States military, oil and copper refining, steel production facilities and universities. On the other hand, the company does face strong headwinds when it comes to rate increases in a regulated market. Overall, I firmly believe this company is on track to increase its dividend this year.

Source: Big Dividends From 5 Key Utilities