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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. Below, I will analyze five utilities which are all displaying strong future growth prospects. I chose these five utilities because they provide an excellent starting point for analysis of the utilities sector.

PNM Resources, Inc. (PNM): PNM Resources has been range bound between $17 and $19 per share over the past four months. The company pays out a dividend of $.50 per share, amounting to a dividend yield of 2.7%. This dividend is paid out on a fairly consistent basis. The payout ratio on the dividend is 17% of the company's earnings, which is much lower than the industry average of 60%. The company's two main competitors in this market are El Paso Electric Company (EE), with a five year expected PEG ratio of 3.59, and Xcel Energy Inc. (XEL), with a five year expected PEG ratio of 3.06. PNM Resources is much cheaper in terms of growth with a five year expected PEG ratio of only 1.49. PNM Resources is another one of those old, well-established utility companies. Based in Albuquerque, New Mexico and incorporated in 1917 the company owns and operates energy-related businesses across the country. In my opinion, the company is also preparing itself for the next millennium through its investment in wind energy programs and nuclear power generation. The company also generates electricity through the burning of coal and natural gas at this time.

TECO Energy (TE): TECO Energy has been range bound between $16 and $20 per share over the past twelve months. The company pays out a dividend of $.88 per share amounting to a dividend yield of 4.9%, and this dividend is paid out as well as raised on a consistent basis. The payout ratio on the dividend is 67% of the company's earnings, which is slightly higher than the industry average of 60%. The company's two closest competitors in this market are Southern Union Company (SUG) with a five year expected PEG ratio of 4.86, and Ameren Corporation (AEE), with a five year expected PEG ratio of -13.18. TECO Energy is rather inexpensive by comparison, with a five year expected PEG ratio of 3.13. Located in West Central Florida and established in 1899, TECO Energy is an electric and gas utility company that also operates surface and underground mines, owns mineral rights and interests in coal processing and loading facilities. The company furthermore provides natural gas services in the area. I think TECO Energy's prospects for future growth are well above the industry's average due to the company's diversification in general and location specifically. As the nation's baby boomers continue to retire, West Central Florida is a prime location for demographic growth. With this growth will come an increase in demand for electricity, natural gas and other natural resources the company provides.

National Grid Transco (NGG): National Grid Transco has been range bound between $44 and $54 per share for most of the past year. The company pays out a nice dividend of $2.19 per share (annually). This amounts to a dividend yield of 4.3% and this dividend is paid out on a fairly consistent basis. The payout ratio on the dividend is 138% of the company's earnings, which is significantly higher than the industry average of 60%. The payout ratio on this dividend is actually more than the company is taking in (earnings) and this is not a sustainable situation. The company's two closest competitors in this market are Southern Union Company with a five year expected PEG ratio of 4.86 and Consolidated Edison, Inc. (ED), with a five year expected PEG ratio of 4.43. National Grid Transco with a five year expected PEG ratio of 2.97 is much cheaper in terms of growth going forward. National Grid Transco is an international energy company that is based in the United Kingdom. The company owns and operates natural gas and electric infrastructure networks in the northeastern United States and United Kingdom. In my opinion, the company has suffered more than the average national company because of its international exposure and the global economic slowdown. This could reverse itself by a wide margin and very quickly when global expansion resumes.

Sempra Energy (SRE): Sempra Energy is presently in a well-established upward trend and hitting new 52 week highs on a daily basis. In addition to this capital appreciation, the company also pays out a dividend of $1.92 per share, bringing the dividend yield in at 3.3%. This dividend is paid out and raised on a fairly consistent basis. The payout ratio on the dividend is 33% of the company's earnings, which is well below the industry average of 60%. The company's closest publicly traded competitor in this market is Consolidated Edison, Inc. with a peg ratio of 4.33 and a five year earnings growth forecast of 3.7%. Sempra Energy is much cheaper by comparison with a five year earnings growth forecast of 1.76. Sempra is another energy company with world wide exposure and has suffered the same impacts of the global slowdown, but to a lesser extent as the companies holdings are mostly in North America. In addition to the company's distribution networks (electric and natural gas) in central and southern California, the company also operates natural gas and electricity distribution in Argentina, Chile, Mexico and Peru. I think the company will enjoy the advantages of global diversification and economies of scale in a significant way once the global economy resumes its expansion.

Constellation Energy Group, Inc (CEG): Constellation Energy Group has been range bound between $30 and $40 per share for most of the past year. The company pays out a dividend of $.96 per share (annually) amounting to a dividend yield of 2.6% and this dividend is paid out on a fairly consistent basis. The payout ratio on the dividend is 48% of the company's earnings which is below the industry average of 60%. The companies closest competitor in this market is FirstEnergy Corporation (FE) which has a five year expected PEG ratio of 8.97. Constellation Energy Group, with its five year expected PEG ratio of 3.64, is much cheaper by comparison. Constellation Energy Group was incorporated in 1906 in Baltimore, Maryland. Since then the company has provided central Maryland with electric and natural gas services. Constellation, more recently, has expanded its operations across the nation and to parts of Canada. In this capacity the company develops, owns, operates, and maintains fossil fuel and renewable energy facilities. Constellation Energy Group also offers its services and expertise to other owners of electricity generating facilities. In my opinion, the company stands to benefit from its expertise in the expanding renewable energy sector in both its own facilities and marketing this know-how to other start up operations. The company is also continuing its expansion and retail growth with the acquisition of Oklahoma retail gas provider-- ONEOK Energy Marketing Company (OEMC).

Source: 5 Utilities To Consider For Their Dividend Payouts