Seeking Alpha
Profile| Send Message| ()  

Recent stock market volatility has pressed some investors to seek refuge in proven safe havens among traditional income-producing stocks. The ongoing uncertainty in the markets amid renewed concerns about the sustainability of the economic recovery is likely to last for quite some time. This suggests that some low-beta utility stocks could benefit from investors' fleeing high-risk cyclical equities. Electric utility stocks offer security and attractive dividend yields at levels of risk well below that of the broader market. For investors looking for a near-term shelter among equities, with a goal to earn some meaningful income, here are five dividend stocks in the electric utility sector yielding 5% or more. Most of these stocks have not been fashionable with guru investors for quite some time.

(click to enlarge)

(click to enlarge)

Pepco (POM) is a $4.2 billion utility company supplying electricity and natural gas to customers in mid Atlantic region and Delaware. Pepco pays a high dividend yield of 5.8% on a payout ratio of 93%. It has been growing dividends at a rate of 0.8% a year over the past five years. The company is expected to grow its earnings per share [EPS] at a 4.9% average annual rate over the next five years. The stock is trading at $18.55 a share, down almost 8% on the year. It should be noted, however, that the stock is not really popular with fund managers.

PPL Corporation (PPL) is a $15.8 billion electric utility company and a natural gas distributor serving customers in Pennsylvania, Kentucky, and United Kingdom. It pays a dividend yield of 5.3% on a payout ratio of 50%. PPL Corporation has been growing dividends at an average growth rate of 4.5% a year over the past five years. Analysts forecast that the company will keep its EPS almost flat over the next five years. The utility's stock is trading at $27.20, down 3.5 percent on the year. Ken Fisher reported a minor stake in the company at the end of the first quarter of 2012.

Entergy Corporation (ETR) is an $11.2 billion electric utility company serving customers in Arkansas, Mississippi, Texas, and Louisiana. It pays a dividend with a yield of 5.3% on a payout ratio of 63%. Entergy has been growing dividends at a 9% annually over the past five years. The company is expected to grow its EPS by a small 1.8% a year over the next five years. The utility's stock is trading at $63.08, some 8.8 percent below the level a year ago. First Eagle Management had a ~2% stake in the company at the end of first quarter of 2012 (see First Eagle Management's portfolio).

TECO Energy (TE) is a $3.7 billion electric utility providing electricity and natural gas to customers in Florida and Guatemala. The company's business units are also engaged in coal production. The company pays a dividend with a yield of 5.1% on a payout ratio of 69%. It has been growing dividends at a 2.6% average annual rate over the past five years. Analysts forecast that the company will grow its EPS by 4.5%. Although small, this rate of growth is acceleration compared to the average annual growth rate of 1.5% a year over the past five years. The stock is changing hands at $17.23 a share, almost 10% below the levels a year ago. David Dreman, Mario Gabelli, and Joel Greenblatt reported small stakes in the company at the end of first quarter 2012.

American Electric Power Company (AEP) is an $18.3 billion power utility providing services to customers in Texas and some 38 eastern and central U.S. states and eastern Canada. The company pays a dividend with a yield of 5.0% on a payout ratio of 46%. The utility has been growing dividends at an average annual rate of close to 4% a year. It is expected to grow its EPS by an average annual rate of 3.9%, somewhat slower than over the past five years. The stock is currently trading at $37.75 a share, down almost 2% in a year. David Dreman reported a minor stake in the company at the end of first quarter of 2012, while George Soros sold out his position at the end of last year.

Source: 5 Electric Utilities Yielding 5% Or More