Time To Get Defensive With This Solid Yielding Utility Stock

Feb.28.12 | About: Public Service (PEG)

The market feels like it is getting closer to a pullback after a significant rally over the past six months. Utilities, which have significantly underperformed the market of late, could be logical defensive picks as well as good providers of yield, which is at a premium in this low interest rate environment. One utility stock that looks like a solid pick up here is Public Service Enterprise (NYSE:PEG).

Public Service Enterprise - "Public Service Enterprise Group Incorporated, through its subsidiaries, operates in the energy industry primarily in the northeastern and mid-Atlantic United States. The company primarily operates as a wholesale energy supply company that integrates its generating asset operations through its wholesale energy, fuel supply, energy trading, and marketing and risk management activities". (Business Description from Yahoo Finance)

6 reasons PEG is a solid buy at $30 a share:

  • Insiders have been net buyers of the stock over the last six months.
  • The stock provides a robust 4.7% yield and has raised its dividend by a little over 3% a year over the past five years.
  • The stock is selling near the bottom of its five year valuation range based on P/E, P/S, P/B and P/CF.
  • The stock is an "outperform" at Credit Suisse and a "buy" at S&P. Both firms have $34 price targets on PEG.
  • The stock has solid support at around current price levels (See Chart)

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  • The stock has a low beta (.45), sells at around 5 times operating cash flow, and has beaten earnings estimates the last three quarters.

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