We are in a stock season when defensive stocks are growing and providing good returns through dividends that investors are having a hard time finding anywhere else. Let's take a look at three utility companies with dividends above 4.00%.
Southern Company (SO)
This utility company has over 42,000 megawatts of generation capacity and is the second largest electric utility by market cap in the United States, supplying electricity to 4.4 million customers in the Southeast. Southern's customer base is located primarily in Alabama, Georgia, Florida, Mississippi, and the Carolinas.
It is presently trading at $46.48 with an annualized dividend rate of 4.05%. Second quarter earnings were microscopically higher than last year, coming in at $623 million as compared to $604 million a year ago. But the company has fallen into the average crowd this quarter, missing revenue as most companies have - $4.18 billion versus $4.52 billion a year ago were the exact figures. It just so happens that last year the weather was warmer the second quarter resulting in more use of electricity. Analysts believe the stock can move another 10% at least. Jefferies has a "Buy" rating on the stock and a price target of $52.50.
Duke Energy Corporation (DUK)
Duke is one of the five largest electric utility companies in the United States, providing 28,000 megawatts of electricity to 3.9 million customers in North Carolina, South Carolina, Indiana, Ohio and Kentucky.
It is presently trading at $67.05 with an annualized dividend rate of 4.69%. Net income this quarter rose to $444 million from $435 million a year ago. Profits were realized when Carolina customers had their rates revised and also due to lower storm restoration costs this year. Duke bought Progress Energy in an $18 billion deal that created the biggest utility in the United States and also started a turmoil that looks like an internal power struggle.
Two former Progress Energy directors (who were now on the Duke Energy board) resigned in protest in what amounted to a boardroom coup. The two are insisting a new chief executive officer was needed because investors and regulators have lost confidence in the company. Voting along party lines, former Progress chief, William Johnson, was ousted. Chief of Duke, James Rogers, was to be executive chairman and Mr. Johnson was to head the company. Well, that arrangement only lasted a couple hours until Mr. Johnson was ousted resulting in regulatory investigations and uncertainty on Wall Street. Standard & Poor's downgraded the company this week and said its "abrupt leadership changes" had "heightened regulatory risk."
An investor might want to hold off on this one until the dust settles.
Entergy generates approximately 30,000 megawatts of electricity and serves 2.7 million people from Texas to Arkansas. Because Entergy's utility operations are predominantly located in the gulf-state regions, it remains susceptible to increased hurricane activity and larger insurance premiums resulting from heightened perceived risks.
It is presently trading at $69.92 with an annualized dividend rate of 4.58%. Q2 EPS of $2.11 was $0.45 better than the analyst estimate of $1.66. It beat forecast for some of the same reasons as Duke Energy's: lower taxes related to storm repair work along with reduced expenses at its Pilgrim Nuclear Power Station. Revenue was down though. It brought in $2.52 billion versus $2.7 billion a year ago. Some analysts believe the stock may peak soon as Jefferies & Company reiterated its "Hold" rating on the company, but slightly raised its price target from $70.00 to $71.00.
Now you can do some further research on these stocks. You might find your work very rewarding with a new income investment stock to add to your portfolio.