After a recent selloff, utility stocks that pay dividends have been on the mend. Many of these companies are offering good value and strong yields. But value and yield are only a part of the equation dividend investors use to find the best dividend stocks. For the long term investor we believe the most important factor to be dividend growth.
Dividend growth is what drives these stocks higher. As the dividend increases, so does the yield which draws the attention of income investors. This demand drives stock prices higher and the increasing dividend then serves to maintain the yield as the stock appreciates. The following 8 stocks have a dividend yield over 3% and have increased its dividend for 10 years or more. We found this information by digging through the fundamentals of each stock in the Utility sector because it is not available in a dividend screener.
Black Hills Corporation (BKH)
Black Hills is an energy company that mostly operates in the United States. Its utilities businesses are made up of electric and gas segments. Black Hills is one of the leaders of this group with 40 years of consecutive dividend increases. It has a dividend yield of 4.3% and a 5 year dividend growth rate of 1.9%. The current payout ratio is 118% but BKH has increased its dividend again in 2012.
Consolidated Edison (ED)
Consolidated Edison delivers electricity and natural gas to its customers in New York, New Jersey and Pennsylvania. ED has a dividend yield of 4.1% and has increased its dividend for 37 years. It has a low 5 year dividend growth rate of .85% and a payout ratio of 67%. ED has a P/E ratio of 16.6 and is up over 18% in the last 12 months.
NSTAR has over 1 million electric distribution customers in Massachusetts. The company is also engaged in natural gas distribution to an additional 300,000 customers. NSTAR has a dividend yield of 4.1% with a 5 year yield average of 4.3%. Its payout ratio is higher than normal at 78% compared to its 5 year average of 69%. NST has increased its dividend for 12 consecutive years and has a 5 year dividend growth rate of 6.2%.
NextEra Energy (NEE)
NextEra is an electric power company that produces renewable energy company with operations in 28 States and Canada. NextEra has a dividend yield of 3.7% which is exactly the same as its 5 year yield average. NEE has increased its dividend for 16 consecutive years and has a payout ratio of 49%. It has a 5 year dividend growth rate of 7.9%
PPL Corp (PPL)
PPL generates electricity from power plants in the United states and delivers electricity to customers on the East Coast. PPL Corp started paying dividends in 1946 and has increased its dividend for 12 consecutive years. It has a dividend yield of 4.9% which is just above its 5 year yield average of 4.7%. PPL has a payout ratio of 52% and has a 5 year dividend growth rate of 4.6%.
SCANA Corp (SCG)
SCANA generates and transmits electricity to its customers in the Carolinas. The company also markets natural gas to customers in the Southeast. SCANA Corp has a dividend yield of 4.3% and has increased its dividend for 11 consecutive years. It has a payout ratio that is in line with its 5 year average at 66%. SCG has a 5 year dividend growth rate of 2.79%.
Southern Company (SO)
Southern Company is the holding company for multiple power companies. Each of these companies provides electricity services to its customers. Southern Company has a dividend yield of 4.2% and a payout ratio of 74%. The company started paying dividends in 1948 and has increased its dividend for 10 consecutive years. It has a 5 year dividend growth rate of 4.05%.
UniSource Energy (UNS)
UniSource Energy is a diversified energy company that operates in the natural gas and electric business segments by providing these resources to its customers in over 30 communities. UniSource Energy has a dividend yield of 4.5% which is above its 5 year yield average of 4.2%. The company started paying dividends in 2000 and has increased its dividend every year since. It has a 5 year dividend growth rate of 14.9%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.