4 Veteran Utilities Preferred Stocks For Income Investors To Consider

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 |  Includes: DUK, ES, NST, SO
by: Investment Underground

by Roger Choudhury

Below, I list preferred stocks from utilities because of monthly bill payments from customers. With the Fed targeting 0%-0.25% for the federal funds rate, you ought to consider the following:

Connecticut Light & Power (NU) (6.56%, Series 1968)

Recent Price

$51.10 per share

Callable?

Anytime at $51.44 per share

Preferred Stock IPO

Jan 1968

Dividends

$0.82 per quarter

All payments made since Q1 2002

Next dividend payment should be on May 1

Record date is in the first week of Apr

Current yield

6.4%

S&P Rating

BBB-

52 week trading range

$49.85 - 65.00

2009 lows

~$40 (from $52)

Ticker symbol (Yahoo! / Google / Fidelity)

CNTHP

Click to enlarge

The company is a subsidiary of Northeast Utilities, which posted an increase in EBIT of 4.6% to $443.668 million in the first 9 months of 2011. Also, interest expense fell by 7.8% to $184.716 million. In comparison, cash dividends on preferred and common stock only amounted to $4.169 million and $145.865 million, respectively. I believe that there is sufficient space for Northeast Utilities to continue to make all dividend payments for the near future.

Additionally, I believe now would be a good entry point into CNTHP, as investors move away from fixed-income instruments and into equities, due to the gilded stock market rally. I would recommend this for income investors that have a medium risk profile.

The Connecticut Light and Power Company provides electric service to 1.2 million customers in 149 cities and towns. Northeast Utilities is a Fortune 500 and S&P 500 energy company based in Connecticut with more than 2 million electricity and natural gas customers.

Florida Power (PGN) (4.60% Cumulative)

Recent Price

$94.75 per share

Callable?

Anytime at $103.25 per share

Possible 8.6% capital appreciation

Preferred Stock IPO

Oct 1950

Dividends

$1.15 per quarter

All payments made since Q1 2002

Next dividend payment should be on May 15

Record date is in the last week of Apr

Current yield

4.8%

S&P Rating

BBB-

52 week trading range

$75.00 - 99.00

2009 lows

~$63 (from $88)

Ticker symbol (Yahoo! / Google / Fidelity)

FLPWM

Click to enlarge

Florida Power is a subsidiary of Progress Energy, which posted a 35.2% decrease in EBIT to $910 million in fiscal year 2011, but interest charges fell by 2.9% to $725 million. The dividends per common share ($2.119) is greater than the earnings per common share ($1.94). Preferred stock make up $93 million of equity, which is a much smaller fraction of common equity $10,021 million, and so I would feel comfortable that preferred dividends are more likely to be paid out. In any case, this is a utility company, so the firm will aim to make these payments, so that it can retain its investment grade rating as well as issue more debt. View the earnings release here. Because of its long track record, I recommend FLPWM to retirees willing to take on some risk.

Progress Energy, headquartered in Raleigh, NC, is a Fortune 500 energy company with 2 major electric utilities that serve ~3.1 million customers in the Carolinas and Florida.

Mississippi Power (NYSE:SO) (4.60% Cumulative)

Recent Price

$82.25 per share

Callable?

Anytime at $100.00 per share

Possible 21.2% capital appreciation

Preferred Stock IPO

Jan 1947

Dividends

$1.15 per quarter

All payments made since Q1 2002

Next dividend payment is on Apr 2

Record date is on Mar 15

Current yield

5.5%

S&P Rating

BBB+

52 week trading range

$81.00 - 88.00

2008 lows

~$69 (from $101)

Ticker symbol (Yahoo! / Google / Fidelity)

MPRWP

Click to enlarge

Mississippi Power is a subsidiary of the Southern Company, which showed an EBIT of $3,487 million (13.7%) in fiscal year 2011. Also, interest charges declined by 4.2% to $857 million. Compare these figures to the preferred dividends of only $65 million, and I am fairly confident that the company will continue to pay out the dividends. View the earnings release here.

MPRWP is nearing its 52 week lows, so you should consider purchasing this soon. I suggest that income investors take a serious look at this, but be aware how much in losses that you can handle.

Southern Company provides electricity to 4.4 million customers across the Southeast.

NSTAR Electric (NYSE:NST) (4.78% Cumulative)

Recent Price

$97.00 per share

Callable?

Anytime at $102.80 per share

Possible 5.7% capital appreciation

Preferred Stock IPO

Jul 1958

Dividends

$1.195 per quarter

All payments made since Q1 2002

Next dividend payment should be on May 1

Record date is be in the first week of Apr

Current yield

4.9%

S&P Rating

A-

52 week trading range

$80.00 - 111.00

2008 lows

~$65 (from $92)

Ticker symbol (Yahoo! / Google / Fidelity)

NSARO

Click to enlarge

In 2011, NSTAR paid out $1.96 million in preferred dividends compared to $277.8 million (+5.0%) in profits. The company has an exceptional record of paying out dividends, hence its A- rating. I would recommend that retirees study NSARO, and consider buying this on a pullback, if you desire higher yield.

NSTAR, headquartered in Boston, is an energy delivery company that serves 1.4 million customers in Massachusetts. The company is in the process of merging with Northeast Utilities .

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