CenterPoint Energy (CNP) headquartered in Houston, Texas, delivers natural gas and electricity to about 5,000,000 customers. The revenue of the company depends a lot upon the weather, electricity, and natural gas prices. Unfortunately, fourth quarter profits for the company fell 6% after a long increase in stock value.
What has attracted investors to diversified utilities like CNP is the consistent strong dividend. It has consistently put together a 4% return for its shareholders. This is the only reason one should invest in the stock long term right now. Recently, if we look at a long term chart, there is a strong negative divergence in the charts showing a weakness in the uptrend. When it peaked in about November 2011, it has been steadily moving down in a bearish peak and valley pattern.
We believe it will continue to move down through 2012 because the natural gas industry will continue to struggle. If you are not a dividend investor then do not invest in this stock for long term growth. It is just not the right time for this stock.
Natural Gas prices suffered badly because winter decided not to come to most of the United States. According to indicators, it appeared oversold most of January but even failed to rally. It has yet to turn up. Recently, forecasts natural gas productions in the U.S. were slightly lifted, but nowhere near record levels. The problem can be seen in the weather. Natural gas production is not needed at this time because the cold weather that raises the demands just never came. That gives us an excess. The prices of these stocks will go down.
CNP is a worthy investment for dividend investors but a bit premature for value investing.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.